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FHA's mortgage insuranceprograms help low- and moderate-income familiesbecome homeowners by lowering some of the costs of their mortgage loans.FHAmortgage insurancealso encourages mortgage companies to make loans tootherwisecreditworthyborrowersand projects that might not be able to meet conventional underwriting requirements, by protecting the mortgage companyagainst loandefaulton mortgages for properties that meet certain minimumrequirements--including manufactured homes, single-family and multifamilyproperties, and some health-related facilities.Section 203(b) is the centerpiece of FHA's single-family insurance programs. It is thesuccessor of the program that helped save homeowners from default in the 1930s,that helped open the suburbs for returning veterans in the 1940s and 1950s, andthat helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the FederalGovernment expands homeownership opportunities for first-time homebuyers andotherborrowerswho would not otherwise qualify forconventional loanson affordable terms, as well as for those who live in under-served areas wheremortgages may be harder to get. In FY 1997, FHA insured more than 790,000homes, valued at almost $60 billion, under this program. FHA currently insures atotal of about 7 million loans valued at nearly $400 billion. These obligations areprotected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely byborrower premiums.Section 203(b)has several important features:Down paymentrequirements can be low. In contrast toconventional mortgage  products, which frequently requiredown paymentof 10 percent or more of thepurchase price of the home, single-family mortgages insured by FHA underSection203(b)make it possible to reducedown paymentsto as little as 3 percent. This is becauseFHA Insuranceallowsborrowersto finance approximately 97 percent of the value of their home purchase through their mortgage, in some cases.Manyclosing costscan be financed. With mostconventional loans, theborrowers must pay, at the time of purchase,closing costs(the many fees and chargesassociated with buying a home) equivalent to 2-3 percent of the price of the home. This program allows theborrowerto finance many of these charges, thus reducingthe up-front cost of buying a home.FHA mortgage insuranceis not free: borrowerspay an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are addedto the regular mortgage payment.Some fees are limited. FHA rules impose limits on some of the fees that mortgagecompanies may charge in making a loan. For example, the loan origination feecharged by the mortgage company for the administrative cost of processing the
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