What Is The Federal Housing Administration?

You are likely hearing a lot about the FHA, or Federal Housing Administration. They have become the backbone of the housing market currently and likely will continue to play a significant role until the economic crisis and financial markets free up. This is a good thing since the FHA has a long history of providing stability in the American housing market. They could be the resource you need to get into a home loan.

While this blog is about the FHA and loan available through it, it may be important to take a step back and find out who this organization is and why they are even around.

The FHA was created by the National Housing Act of 1934. It was created during the Great Depression, as a way of helping to support the American people in finding loans to borrow money to buy homes. The goals of the organization are specific:

• Improve housing standards and conditions
• Provide home loan financing through an insurance program for mortgage lenders
• Stabilize the mortgage market

During the Great Depression, the banking system had fallen and home loans availability was next to nothing. People could not afford their homes. When the banks failed, any mortgages out during that time (which ere shorter term and had no amortization) were called due. This caused many homeowners to foreclose on their homes for lack of funds to pay back the loans. When the Federal Housing Administration was created, its initial goal was to help regulate the interest and terms of the mortgages. Now, more people could afford a down payment and the monthly payment of their loan.

Over the last 70 plus years, the job of the Federal Housing Administration has changed somewhat, but in most terms, it still has the same job of stabilizing the housing market, specifically in terms of the availability of loans to buy homes.

Today’s Job

The FHA provides a level of insurance protection for the commercial lender. You borrow an FHA approved loan through these commercial lenders. They agree to charge you a lower rate of interest for this protection. If you default on the loan, the lender is able to get a payout for your loan.

The FHA has become one of the backbones in the housing market right now and will continue to be so. Home ownership is one of the most important factors of success in an economy. This is why so much attention is being placed on this department of the government right now. To right the economy, the housing market has to stabilize.

If you are interested in getting a home loan, find out what FHA loans are available to help you accomplish this.

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