Did you know: the first national mortgage loan program came about because of the Great Depression, and that program is still in existence today.
It’s the FHA mortgage, and since 1934, it’s been backed by the Federal Housing Administration, one of five government agencies that work in mortgage lending.
The FHA loan is known for its status as a low down payment home loan; and, as a catch-all for buyers who might not meet the credit rating or first-time buyer requirements of some other low- and no-down-payment mortgages.
Before the FHA, home buyers were required to make down payments of fifty percent or more in order to purchase a home; and, banks gave them five years or fewer to repay their loans in full.
When the FHA came along, it made homeownership possible for millions of post-war renters and, today, the program has been used more than 48 million times.
The FHA loan is characterized by several key traits:
- A down payment requirement of 3.5 percent, at minimum
- All credit ratings are accepted and allowed
- You don’t have to be a first-time buyer (but you can be!)
The FHA loan is also assumable, which means that a future buyer of your house can buy your home; and, your mortgage and its interest rate. Should mortgage rates rise in the future, an assumable loan could help you sell at top-dollar.
Roughly 20 percent of today’s buyers use FHA financing.
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Home buyers snatched up properties for sale in May as housing made its v-shaped recovery.