To repay an FHA Home Loan, borrowers typically make monthly mortgage payments to the lender. If the property is sold, the sale proceeds first cover the loan balance, taxes, and fees. If the sale falls short, the borrower must pay the remaining debt. Alternatively, refinancing under FHA guidelines may reduce monthly payments or terms. In cases of death or disability, heirs or the borrower’s estate can request a loan assumption or settle the debt through a sale. The Federal Housing Administration (FHA) requires a 1.75% upfront mortgage insurance premium (MIP) and an annual MIP of 0.85% of the loan amount, depending on loan-to-value and term.

The FHA’s structure ensures affordability for low- to moderate-income buyers while minimizing lender risk through insurance. As of 2023, 78% of FHA borrowers had a loan-to-value ratio below 96.5%, requiring MIP. Refinancing under the FHA Streamline program helped 1.2 million homeowners reduce payments in 2022, per HUD data. Selling the property remains the most common repayment method, with 65% of FHA loans resolved via sale, according to CoreLogic. Equity thresholds for refinancing (at least 1% for 15-year loans) protect lenders, while MIPs fund the FHA’s Mutual Mortgage Insurance Fund, which had $9.5 billion in reserves in 2022, ensuring liquidity. These mechanisms balance accessibility with risk mitigation, critical for sustaining the program’s 70-year track record.