Consumer News - Consumer Guides - Home Mortgage Insurance: Other FHA Mortgage Insurance Programs

Although the following FHA mortgage insurance programs are still active, they are not used as much as the six major FHA programs, because they were designed to serve certain specific purposes.

Section 203(h)
Mortgage Insurance for Disaster Victims
(Federal Domestic Assistance Code 14.119)
You may use this program to finance the purchase of a home if your home was

damaged or destroyed because of a major disaster. The President of the United States must designate the area a major disaster area. The loan may be used to purchase an existing home or a newly built home.

Disaster victims are not required to meet minimum investment requirements, and a down payment is not required.

Section 203(i)
Mortgage Insurance for Outlying Area Properties
(Federal Domestic Assistance Code 14.121)
You may use Section 203(i) to purchase a home in a rural area. You may also use it to purchase a new farm house on 2.5 or more acres of land adjacent to an all-weather road.

Section 220
Urban Renewal Mortgage Insurance
(Federal Domestic Assistance Code 14.122)
This program is used in conjunction with local governments to rehabilitate existing dwellings for up to 11 families or to build new dwellings in redevelopment areas where concentrated housing, physical development, and public service activities are being carried out. If the building houses more than four families, the mortgage limit increases $9,165 for each additional unit.

Section 220(h)
Insured Improvement Loans in Urban Areas
These loans are used to finance alterations, repairs, or improvements to existing dwellings housing up to 11 families in a redevelopment area as defined in Section 220. The mortgage limit is the lesser of:

HUD's estimate of the cost of improvements;
$40,000; or
$12,000 for each family unit ($17,400 in high cost areas).

Section 221(d)(2)
Home Mortgage Insurance for Low and Moderate Income Families
(Federal Domestic Assistance Code 14.120)
This program may be used by low- to moderate-income families to finance the purchase of a home. It may also be used by families displaced by urban renewal, code enforcement, condemnation, etc., or as a result of the President declaring an area a major disaster. The mortgage limit for a one-family unit is $31,000. This amount may be increased up to $36,000 in high cost areas determined by the Department.

Section 223(e)
Miscellaneous Housing Insurance
(Federal Domestic Assistance Code 14.123)
You may use Section 223(e) to purchase a property in an older, declining urban area where normal requirements for mortgage insurance cannot be met. Only HUD can determine whether a property is eligible for Section 223(e) mortgage insurance. This program is intended to supplement other HUD mortgage insurance programs.

This program is limited by law to mortgages up to $18,000 ($21,000 in high cost areas.)

Section 238(c)
Mortgage Insurance in Military Impacted Areas
(Federal Domestic Assistance Code 14.165)
You may use Section 238(c) to finance the repair, rehabilitation, or purchase of a home near any military installation in a federally-impacted area. The Secretary of Defense must certify the need for additional housing in the area.

Section 245(a)
Graduated Payment Mortgage
(Federal Domestic Assistance Code 14.159)
The Graduated Payment Mortgage (GPM) Program allows you to make lower payments during the early years of the loan. As your income increases, your payments also gradually increase for several years, then level off and remain steady for the balance of the mortgage.

With a GPM, you in effect borrow additional money during the early years of your mortgage by deferring interest payments. This allows you to have smaller initial monthly payments. The deferred interest is added to the loan balance in later years.

FHA offers five GPM payment plans, which vary in the rate of payment increases and the number of years over which the payments will increase. The greater the rate of increase or the longer the period of increase, the lower the mortgage payments in the early years. For example:

Year	203(b)	GPM Loan
1	526.80	400.22
2	526.80	430.24
3	526.80	462.50
4	526.80	497.20
5	526.80	534.49
6	526.80	574.57
Remaining Payments	526.80	574.57

To give you an idea of how a 245(a) GPM works, the following table compares the monthly payment schedule of a 203(b) FHA-insured loan with Plan 3, the most frequently used GPM plan. In Plan 3, payments increase 7.5 percent each year for 5 years before leveling off. The example uses a 30-year, $60,000 mortgage, with an interest rate of 10 percent:

GPM Plan	Increase in Monthly Payments	Frequency of Increase
Plan 1	2.5 percent	First 5 years
Plan 2	5 percent	First 5 years
Plan 3	7.5 percent	First 5 years
Plan 4	2 percent	First 10 years
Plan 5	3 percent	First 10 years