The Federal Housing Administration (FHA) has quietly supported the dream of homeownership for more than 70 years. Mortgage loans available through the FHA serve low- to middle-income homeowners and homebuyers.

If you think home ownership is out of your reach, perhaps you haven't been introduced to the FHA. Thanks to some recent increases in loan limits, this division of the federal office of Housing and Urban Development is set up to be the prospective homebuyer's new best friend.

FHA loans are characterized by reduced eligibility requirements, and down payments as low as 3 percent. The federal government doesn't fund these loans; they make them available to borrowers by arranging for low-cost mortgage insurance. While borrowers are responsible for the mortgage insurance premiums, the upfront portion can be financed into the loan. To obtain an FHA loan, the prospective borrower must apply with an FHA-approved lender. Loan amounts are subject to stated limits, which vary by county and change periodically. Below is an overview of the most popular programs.

Mortgage insurance for standard purchase and refinance mortgages

• The Section 203(b) program provides low-cost insurance for fixed-rate mortgages and refinances.
• Low-cost mortgage insurance for adjustable-rate mortgages is available through the FHA's Section 251 program.
• Condominium buyers can obtain mortgage insurance for 30-year mortgage loans under Section 234(c).

Insured rehabilitation mortgage

The 203(k) program allows for financing of a home purchase. plus the cost of necessary home repairs. Typically, a non-FHA loan won't finance repair costs until after those repairs have been completed. The FHA's program addresses this issue by establishing an escrow account from which the contractor will be paid. During the loan approval process, the borrower must provide a detailed scope of work, and cost estimates for the repair project.

Insured reverse mortgage

FHA reverse mortgages allow homeowners aged 62 and older to cash out the equity in their homes without obligating them to monthly debt repayments. The reverse mortgage isn't repaid until the homeowner sells the home or passes away.

Insured energy efficient mortgage (EEM)

The FHA's energy efficient mortgage program insures financing to pay for home energy improvements. To qualify, the borrower must be eligible for an FHA-backed loan in the amount of the purchase price. A home energy rating report determines how much additional financing is needed to cover the cost of the energy improvements.

Insured graduated payments mortgage (GPM)

A graduated payments mortgage is structured with low initial payments that increase over time; the FHA insures these mortgages under its Section 245 program. Exact loan structures vary, but borrowers have the option of having payments increase during the first five or 10 years of the mortgage loan.

When it's time to buy a home, the FHA really can be the ally you need. Check with an experienced FHA lender to decide which program is right for you.