What Is a Title II Mortgage?

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Homebuyers can benefit from federally backed loans.
Homebuyers can benefit from federally backed loans. (Image: new home for sale image by itsallgood from Fotolia.com)

Select homeowners can qualify for Title II mortgages through the U.S. Department of Housing and Urban Development’s Federal Housing Administration. The program aims to expand home ownership among Americans. Several sub-types of the Title II program exist.

Mortgage Insurance

Qualified borrowers can purchase mortgage insurance through HUD’s Title II 203(b) program. People can buy a home with 3.5 percent down, and then combine the cost of the mortgage insurance premium with the rest of the loan. The federally insured mortgage protects lenders in case of default while expanding opportunities for people to buy homes.

Fixer-Upper

HUD will help people buy fixer-upper homes with its Title II 203(k) program. The agency requires a 3.5 percent down payment. A buyer can borrow enough money for the home, the cost to remodel and the allowed closing costs.

Moderate-income help

HUD offers mortgage insurance on loans of up to 40 years so companies and non-profit agencies can build housing for the elderly and people of moderate incomes. Applicants for the Title II 221(d) program must construct buildings with at least five units.

Condominiums

People buying condominiums can apply for mortgage insurance through the Title II 234(c) program. The insurance will protect loans up to 30 years. Low-income renters might apply for the program if their landlord converts their apartment into a condominium.

Graduated Payment

Home buyers, such as young people who expect their incomes to rise, can apply for an FHA graduated payment mortgage. Payments with Title II program 245 mortgages start small and then increase each year during the loan term.

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