• Government loans help revitalize neighborhoodsAmerican Flag image by dwight9592 from Fotolia.com
  
  The Federal Housing Administration (FHA) was created by Congress in 1934 to address the difficulties of home ownership during tough economic times. The FHA became part of the U.S. Department of Housing and Urban Development (HUD) in the 1960's, further increasing the government agency's ability to help low income buyers become homeowners. The FHA has adjusted and expanded its programs and influence according to market trends, economic difficulties and now, environmental necessity.
  
  

Section 203(b) Mortgage Insurance

• FHA's 203(b) mortgage insurance program is the most popular of the government agency's programs. It insures mortgages for the purchase or refinance of a principal residence. An FHA-approved lending institution originates (funds) the new loan and HUD insures it. The borrower must meet credit criteria as outlined in the FHA Handbook 4155.1 for one- to four-unit residences. Borrowers must also contribute a minimum 3.5 percent down payment and adhere to FHA's mortgage limits for the area in which they buy.
  
  

Energy Efficient Mortgages

• FHA-insured Energy Efficient Mortgage (EEM) helps homeowners make their home more environmentally-friendly and economical. The program allows homeowners or buyers to finance the cost of energy efficient improvements through an FHA insured purchase or refinance loan. The FHA recognizes that a home with energy efficient features saves borrowers money on utility bills, allowing them to use the extra funds to pay the higher mortgage with the incorporated improvement costs. Borrowers do not have to credit qualify for the EEM money or make a down payment on the additional financing, according to HUD.
  
  

Section 203(k) Rehabilitation Insurance

• FHA's 203(k) insurance program offers financing for the purpose of rehabilitating a home in need of repair or modernization. As HUD's primary loan for repairing single family properties, the 203(k) rehab loan helps to revitalize neighborhoods and communities while helping first-time, low-to moderate-income homebuyers. The program may be used in conjunction with FHA's EEM program, as well as other state and local housing agencies and non-profit organizations to assist borrowers. The 203(k) program functions as the property acquisition loan and the construction loan all in one, based off of the home' projected value once rehabilitated. FHA insures the loan even before improvements are made.