Federal Housing Administration

Created in 1934 to provide affordable housing financing for qualified borrowers, the Federal Housing Administration (also known as the Federal Housing Authority, or FHA) insures mortgages on loans made by FHA-approved lenders throughout the U.S. and its territories, thereby limiting the lender’s risk. The largest mortgage insurer in the world, the FHA is the only government agency operating entirely from self-generated income, at no cost to taxpayers. It has insured over 34 million properties since its inception, including single- and multifamily homes, manufactured homes and hospitals.

FHA vs. Conventional Financing. There are many similarities between FHA mortgage financing and conventional mortgage loans, but some important differences. While interest rates are similar, credit guidelines vary – for instance, the FHA can deliver favorable interest rates to borrowers with less-than-perfect credit. To secure an FHA-backed mortgage loan, borrowers must pay an upfront insurance premium (about 1.75 percent of the loan amount, a payment that can be included in the financing package) and a monthly premium of .55 percent of the loan amount divided by 12 months. The FHA also requires a down payment of 3.5 percent.

The embodiment of economic stimulation. The FHA provides an enormous economic boost to the country by spurring home and community development. These efforts trickle down to local communities in the form of jobs, customers for building suppliers, improved tax bases and school construction, expansion and improvement, among other revenue streams.