Basic FHA Loan (Home Mortgage Insurance – HUD/FHA)

By December 21, 2012
Sponsored Listings

The basic FHA loan which falls under section 203b is an effective mortgage insurance loan provided by the HUD/FHA to protect lenders against risk of default. Section 203b is the basic FHA loan which is a mortgage insurance program form for single families. This housing loan is provided by the HUD’s FHA or the Federal Housing Administration to insure the mortgage loans made by the qualified private lenders to people refinancing or purchasing a primary residence.

126971813This is also commonly known as FHA One to Four Family Mortgage Insurance and it is still an important tool in the form of a government loan which is used by the federal government to a great effect to expand financial mortgage assistance to first time home buyers and other borrowers, who do not qualify for conventional loans for mortgage on affordable terms and also for those individuals who live in underprivileged areas, where it is harder to get mortgage facilities. The FHA Mutual Mortgage Insurance Fund, protect these obligations and it is maintained by borrower premiums entirely.

The basic FHA loan program is an effective tool in the hands of FHA and it is governed by HUD. It is a government loan program which provides insurance mortgage assistance to lenders against the risk of mortgage defaults from qualified or eligible buyers. The mortgage insurance can be used to finance the purchase of existing or new one to four family housing as well as to settle debts. The section 203b of the housing loan has several important benefits:

  • The requirements of down payment can be low. Unlike the conventional insurance mortgage loans, which requires frequent down payment of 5 percent or more of the total purchase price of the house, the FHA approved single family mortgages which falls under section 203b, reduces the rate of the down payment to 3.5 percent. This is simply because the insurance mortgage provided by the FHA allows borrowers of the loan to repay approximately 96.5 percent of the total value of their house or property purchase price through mortgage repayment.
  • The fees charged by the lenders in order to provide basic FHA loan assistance to the borrowers are regulated by the FHA, as the FHA impose limits on the fees. The fee charged by the lenders, which include processing and administrative cost may not exceed more than one percent of the loan amount received by the borrower.
  • The insured amount is fixed by the HUD and it depends on geographic locations. 

The lending institutions or agencies that provide this housing loan assistance are approved by the FHA. Thus, FHA approved banks, loan agencies and mortgage companies are authorized lenders of the basic FHA loan.