The year 1934 was not a good year to buy a house, or attempt to hold on to the one you were living in. In response to the banking crisis of the Great Depression, the Federal Housing Administration (FHA) was created to guarantee home mortgages. Through thick and thin, it has hung in until this very day and is now officially living in the Department of Housing and Urban Development (HUD).

It produces its own income by charging for insuring housing mortgages. An FHA-guaranteed home mortgage will come with a lower down payment requirement, a safety inspection, and a cost to the borrower of a percentage of the loan. This charge protects the bank, not the borrower. It stays in force for the life of the loan. It is not inexpensive.

Mission creep over the years has the FHA into all kinds of stuff, as you might imagine, but its base product of an insured mortgage is what it was created for.

There are a number of ways of insuring a mortgage. Have someone in the industry explain them to you before you commit to borrowing big bucks. Financial literacy is a team sport.

Real estate professionals know about these things and can be a great shortcut to knowledge. Knowing the pluses and minuses requires someone who knows how these things work. Ask about the FHA the next time you meet someone in the business. Get a couple of different views, then form your own.

Keeping up with all the facets of your financial life requires that you ask about all things financial. The FHA should be an easy fact to master.

Jack Falvey is a frequent contributor to the Union Leader, Barron’s and The Wall Street Journal. He can be contacted at