Government Assisted mortgage

FHA-insured loans have helped tens of millions of people buy or refinance their homes.

The Federal Housing Authority (FHA), which operates within the U.S. Department of Housing and Urban Development (HUD), has a number of loan programs that encourage lending by insuring lenders against borrower default. Although borrowers must meet credit standards and show an ability to pay, liberal terms make these programs popular among home buyers with relatively modest income and limited credit.

Section 203b Insured Mortgage

The 203b insures mortgage loans for qualified borrowers purchasing or refinancing a primary residence. The main benefits of this program are that it allows up to 6 percent seller assist—with the seller's permission, the borrower may finance up to 6 percent of the purchase price for closing costs—and requires only a 3.5 percent down payment.

Section 203(h) Insured Mortgage for Disaster Victims

The Section 203(h) program is for victims of major disasters who wish to rebuild their homes or buy new ones. Unlike the the standard 203(b) insured mortgage program, the mortgage for disaster victims offers 100-percent financing.

Section 255 Home Equity Conversion Mortgage (HECM)

Popularly known as a "reverse mortgage, " the HECM lets senior citizens age 62 and older cash out their equity to cover living and other expenses. Payouts may be received monthly or as a line of credit or both. Only FHA-approved lenders may offer reverse mortgages. HUD encourages prospective borrowers to speak with a HECM counselor before applying.

Section 203k Rehabilitation Mortgage

Typically, the FHA requires certain repairs to be made on homes as a condition for financing. The 203k rehabilitation mortgage combines a regular FHA-insured mortgage with an insured "rehab loan" that allows repairs and improvements to be made to a home after closing, while the buyer lives there. Work requiring specialized skills and knowledge must be completed by an FHA-certified subcontractor.