FHA Loan Programs
FHA Multifamily Loans, Assisted Living Loans, Hospital & Manufactured Housing Loans
The Federal Housing Administration or FHA is part of the Department of Housing and Urban Development or HUD, which is the largest mortgage insurer in the United States. FHA loan programs provide long-term, non-recourse multifamily loans, low-income apartment loans, assisted living facility loans, skilled nursing facility loans, seniors housing loans, critical access hospital loans and manufactured housing community loans.
The FHA LEAN program provides access to the flexibility of the HUD FHA loan programs on an expedited basis. As the availability of alternate sources of capital has fluctuated greatly, at times being extremely limited, apartment owners and multifamily developers have begun turning to agency lending to originate new multifamily loans and to refinance loans on their existing apartment projects. FHA Loan Programs can play a critical role in that it is a source of mortgage financing that is always available, regardless of market volatility.
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FHA Federal Housing Administration
The Federal Housing Administration, generally known as FHA, is an agency of the federal government that provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
FHA Mortgage Insurance
FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance.
Purpose Of FHA Mortgage Insurance
Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.
FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue.
History of FHA
Congress created the Federal Housing Administration (FHA) in 1934 and the FHA became a part of the Department of Housing and Urban Development’s (HUD) Office of Housing in 1965. When the FHA was created, the housing industry was, for all intents and purposes, extinct due to the Great Depression.
- Two million construction workers had lost their jobs.
- Terms were difficult to meet for home buyers seeking mortgages.
- Mortgage loan terms were limited to 50 percent of market value, with a three to five year repayment schedule ending with a balloon payment.
- America was primarily a nation of renters. Only 4 in 10 households owned homes.
During the 1940s, FHA programs helped finance military housing and homes for veterans returning from service in WWII and their families after the war.
In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately-owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA’s emergency financing kept cash-strapped properties afloat.
The FHA moved in to steady falling home prices and made it possible for potential home buyers to get the financing they needed when recession prompted private mortgage insurers to pull out of oil producing states in the 1980s.
By 2001, the nation’s home ownership rate had soared to an all time high of 68.1 percent as of the third quarter that year.
The FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages since 1934. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.
In the more than 60 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world. HUD has helped greatly with that success.