Government Housing Programs Essay

Discussion 6 Chapters 11 & 12

Mar 16

NewActions

Celene 

March 16, 2024

BRE-126 Real Estate finance

Huber, W

Chapters 11 & 12

Overview

The overview of Chapter 11 is learning the government programs like Federal Housing Administration (FHA) and Veterans Affairs (VA) Loans. “Neither FHA nor VA makes loans “directly” to the public. The FHA insures, but the VA guarantees loans made by “appropriate lenders.” (Huber, 2017, p. 289) Neither FHA nor VA loans are included in the secondary market. Some things they do not do is Buy loans or sell loan-backed securities. On the contrary, FHA is viewed as a federal insurance agency whereas VA acts as a guarantor to protect the approved lenders against borrower’s defaults.

Key Concept from Chapter 11

One thing I learned from reading Chapter 11 is that in 1934 FHA was created by Congress. Its purpose was to create new jobs through building. To increase the mortgage market and to show that financing is available, repair and sale of real estate exists. “The FHA’S primary function is to insure loans, FHA “approved lenders” are insured against losses caused by borrower default” (Huber, 2017, p. 291). One of the many insurance programs that they are joined with is called Mortgage Insurance Premium (MIP).

Key Concept from Chapter 12

In chapter 12 we learned about the advantages and disadvantages of a lease option. The advantage of a lease option is that the seller is receiving income from the property. The disadvantage is that the seller cannot sell the property to anyone other than those who are renting during the time of the lease. “The lease/option is used only when it seems unlikely that other offers will be forthcoming in the near future” (Huber, 2017, p. 323). The seller cannot engage in utilizing the property during the term of the lease.

Key Concept from Chapter 11

The second concept that I learned in Chapter 11 is an FHA loan term is between a 15–30-year period. FHA also offers adjustment loans and home repair loans which is a 203 (k) loan. FHA conventional rates are typically lower than any other loans but the risk from the lender is less because of the FHA mortgage insurance. “Unlike Conventional Loans, FHA loans are fully assembled without any increase in interest rates. A lender is prohibited from exercising any “due sale” clause on a transfer” (Huber, 2017, p.293).

Summary

by Celene Cruz

After reading these chapters it has been an eye-opener to when I purchased our home on understanding why FHA was not the best fit for us at the time. Seeing the breakdown of the requirements, and the legal documentation behind it makes a lot more sense. Moving forward as I am preparing myself to become a real estate agent, I am eager to learn more about these home loan programs because I am sure it will be in the state exam. As well as it will be brought up in the field.