FHA's Role in Helping People Obtain Home Mortgages

RCED-96-123: Published: Aug 13, 1996. Publicly Released: Aug 13, 1996.

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Pursuant to a congressional request, GAO provided information on the Federal Housing Administration's (FHA) role in helping people to obtain home mortgages.

GAO found that: (1) FHA and Department of Veterans Affairs (VA) programs allow borrowers to make smaller downpayments and accumulate higher total debt to income ratios than private mortgage insurers (PMI); (2) FHA programs finance closing costs as a part of the mortgage, insure loans up to $155,250, and provide full insurance coverage to lenders; (3) FHA insured 15 percent of the single-family housing market in 1994; (4) FHA insures low-income homebuyers with incomes no greater than 80 percent of the median income of the metropolitan statistical area; (5) FHA insures more home purchase mortgages than PMI or VA; (6) two-thirds of FHA approved loans would not have qualified for PMI; (7) the maximum loan amount for a FHA single-family home mortgage is the lesser of 95 percent of the median house price or 75 percent of the Federal Home Loan Mortgage Corporation's loan limit; (8) the federal government promotes affordable homeownership through several HUD and other Federal programs; (9) these programs require federal funds and assist homebuyers in combining their assistance with FHA mortgage insurance; and (10) FHA programs promote homeownership among home buyers that are typically underserved by other agencies and PMI.

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