HUD or Housing and Urban Development was initiated in the year 1937 with the passing of the U.S Housing act. The intent was to offer low cost housing and subsequent grants to aid families in getting proper housing facilities.
FHA or Federal Housing Administration, created in the year 1934 by the National Housing lies beneath the HUD dominion, however the focus of the programs offered by FHA is quite different from the focus of the programs offered by the HUD. FHA typically acts as an insurer of mortgages, i.e. it provides mortgage insurance on loans made by approved lenders all across the United States.
HUD is focused towards programs for community development. It provides housing assistance to families that require aid. HUD runs multiple community planning and development programs that in effect provide shelters, rehabilitation and low cost housing to people qualifying for these benefits.
HUD in effect pertains to multiple families and commercial housing loans. These loans are made available to the lower income group people. It acts as an agency overseeing and monitoring the residential lending programs being funded by the government. HUD also possesses residences in many communities throughout the U.S. and puts them up for sale at striking rates and affordable terms.
HUD also plays an important role to shield customers through education, Fair Housing Laws, and housing rehabilitation initiatives.
For certain communities and small towns there are special grants provided by the HUD for developmental work. It has a dedicated webpage for keeping the citizens updated on the schemes and programs available. It also provides detailed explanation on the eligibility criteria so that no deserving consumer gets left out. It also provides detailed information on the entire home buying process to assist the interested buyers. The borrowers are educated on their mortgage repayment capability by providing tools that assist in performing these calculations.
There are also guides and information databases to make the consumers aware about their rights as prospective loan borrowers and home buyers.
FHA on the other hand, predates HUD by over thirty years. HUD now administers FHA residential lending regulations and programs. The FHA lending program is a self-sustaining one in the sense that the income that it generates from the mortgage insurance remunerated by the borrowers are captured in an account that is used to execute the program entirely.
The main function of the FHA is to provide mortgage insurance to approved lenders on behalf of home buyers. On home loans which have less than twenty percent of the loan value paid as a down payment, mortgage insurance is required by the lenders in order to protect their interests in case of a default by the customer.
Upon request, when a borrower of a home loan gets an approval from the FHA, the FHA in effect, pays the mortgage insurance on their behalf, as a guarantee to the lenders that in case the borrower defaults on the repayment, FHA will ensure that the lender gets paid its dues.
FHA mortgages are available lower interest rates than traditional mortgages. These can be accessed by home owners who intend to purchase single family or multiple family homes with an intent to reside in that home.
FHA was created to bring back the construction industry back on its feet after it had completely collapsed back then due to high loan default rate. The situation was such that the interested home owners were unable to meet the lender’s stringent criteria for house loans.
FHA’s involvement helped steady the construction industry and make homes affordable to the low to middle income families