The FHA is part of HUD, the Department of Housing and Urban Development. The FHA "has 4.8 million insured single-family mortgages and 13,000 insured multifamily projects in its portfolio."
Lenders would use the FHA as the "go to" place to help those for whom property ownership might otherwise have been out of reach. This market was co-opted by Sub-Prime lenders--the root of the current credit/housing crisis.
Some of the FHA's former parameters: No minimum credit score. Non-traditional credit is acceptable. Low 3% downpayment. Default assistance.
FHA loans were possible as long as a property met HUD's minimum property standards, and certain price parameters. The amounts available for Albemarle County are here. (Note the Single-family, Median, and "High Cost Area Exceptions." Interesting.)
WSJ reports on the coming changes, making FHA loans more expensive:
- The upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1.
- That is up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers' credit scores and the amount of the down payment or equity [for a refi] they owned in the homes.
- For instance: On a $300,000 loan, the new upfront premium works out to $5,250, up from $4,500.
- At a time when house prices generally are falling, the share of new mortgages insured by the FHA has soared to 23% in July from a low of 1.8% in 2006, according to Inside Mortgage Finance, an industry newsletter.