FHA Mortgage Insurance (Part II)

The most frequently used FHA mortgage insurance programs include the following:

1. Section 203(b) is the most commonly used HUD single-family program. It can be used to purchase of a new or used one - to four-family home in both urban and rural areas.

2. Section 234(c) is used to cover the purchase of a unit in a condominium project. Note: there is no up-front Mortgage Insurance Premium (MIP) charged.(Please see FHA -Part I for more information on MIP).

3. Section 203(k) - allows a borrower to purchase or refinance and rehabilitate a home at least one year old. A portion of the funds is used to pay off the existing mortgage, and the remaining funds are held in escrow and released as the rehabilitation is completed.

4. Section 245(a) insures graduated payment mortgages. FHA offers five plans which vary in the rate of payment increases and the number of years over which the payment will increase.

5. Section 251 insures Adjustable Rate Mortgages. The interest rate cannot change more than 1% (up or down) in any one year. Over the life of the loan, the interest rate may not increase or decrease more than 5% from the initial interest rate. Additionally, lenders must inform borrowers at least 25 days in advance if there is an adjustment in the monthly payment.

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