FHA Loans Performing Well in this Economic Climate
Even though the Federal Housing Administration is experiencing problems due to loan defaults and foreclosures, FHA loans are still performing relatively well. When you compare FHA loans to subprime loans, they are performing admirable. Indeed, the FHA is expected to be able to weather the current mortgage market crisis and recession in better shape than many mortgage lenders that were part of the subprime lending boom during the real estate bubble.
So far, the FHA has been able to operate without help from Congressional appropriations. The new losses may change that, but even so, the fact that FHA loans are in a much better place then their subprime counterparts is encourag
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ing. In the next few weeks, the FHA will consider whether appropriations are needed, and offer estimates for any necessary funding.Qualifying for an FHA loan
FHA loans have a special place in my heart, since that is how we bought our home in late 2007. FHA financing allowed us a low downpayment option with a good interest rate. FHA financing has been gaining in popularity since the mortgage market crisis, with 20% of home loans being made in this manner. In order to qualify for an FHA loan, here is what you need, according to CNN Money:
Although these loans target low- and moderate-income Americans, there are no income restrictions. However, FHA does limit the amount that can be borrowed, based on area home values. For example, the most that can be borrowed in a high-cost area such as New York City is $729,750; meanwhile, in Buffalo, N.Y., a purchaser can borrow no more than $276,250. Check the cap limits in your home town.
In addition, borrowers must pay an up-front insurance premium totaling 1.75% of the loan, which goes into FHA’s fund for repaying lenders if borrowers default. So if you take out a $200,000 loan, you would need $3,500 at closing, in additional to normal costs.
You can see why subprime lending, with its 0 down approach was more popular for so long. But it’s no surprise that now buyers are more interested in just getting the mortgage loan financing they need. FHA loans provide that.
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April 18th, 2009 at 10:13 pm
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