Every word of the film, for reading instead of watching.
Nineteen thirty four, the middle of the Great Depression. Buying a house meant half down, and a loan due in five years, so most people simply never owned one. Congress created the Federal Housing Administration to change that. A government agency with one goal: put homeownership within reach of ordinary people.
Ninety years later, that's still the entire mission. The mechanism hasn't changed either. FHA doesn't lend you money. A regular lender does.
FHA insures that loan. If you ever default, FHA covers the lender's loss. And a protected lender can say yes to files the private market declines. That's why everything about FHA is more forgiving.
A five eighty credit score, instead of the six twenty conventional wants. More patience with job changes and employment gaps. Most files need zero months of reserves in the bank. Twelve months of on time rent can count in your favor.
The program is designed to say yes more often. The parameters. Down payment: three and a half percent with that five eighty score. On a four hundred thousand dollar house, that's fourteen thousand dollars, and every dollar of it can be a gift.
Score between five hundred and five seventy nine, it's ten percent down. Debt to income: the printed baseline is thirty one and forty three, but FHA's automated underwrite regularly approves files with close to half of gross income going to debt, when the rest of the file is strong. Now, why this works. Every FHA borrower pays for the insurance that protects the lender.
One point seven five percent upfront, rolled into the loan. Then just over half a percent a year, month by month, about a hundred and seventy seven dollars on that same house. Those premiums pool into one government fund, and when an FHA loan fails, that fund pays the lender back. So mortgage insurance isn't a penalty for weaker credit.
It's the price of the guarantee, the thing that opened the door in the first place. Below ten percent down, it runs the life of the loan. The standard exit is refinancing to conventional at twenty percent equity. There's a separate video on that.
That's the FHA. A ninety year old promise that the door stays open, funded by the people who walk through it. Each piece, the down payment, the ratios, the insurance, the appraisal, has its own video. Start where your question is.