July 3rd, 2017 8:51 AM by Jackie A. Graves, President
During the real estate boom, home loans backed by the Federal
Housing Administration, or FHA, made up only a minority of loans. Higher home
pricesand the popularity of interest-only and no-down payment loans
made FHA loans almost nonexistent.
“In many areas, real estate
prices had skyrocketed above the loan limits set by FHA per county,” says John
Councilman, federal housing chairman for the National Association of Mortgage
Brokers, or NAMB, and president of Maryland-based AMC Mortgage Corp.
the FHA is underwriting loans at quadruple the rate of three years ago,
according to The New York Times. In fact, half of the FHA’s current portfolio
originated in 2009, and FHA loans comprise almost 50 percent of the entire
home-loan market, says FHA Commissioner David H. Stevens.
Higher loan limits, lower home
prices and a low down payment requirement have made these government-insured
loans a more secure bet for homeowners. As a result, more homes now qualify for
loan and you can now purchase a higher priced home using an FHA
loan than in past years, Councilman says.
only that, but stricter traditional loan requirements, such as higher down
payments and higher required credit scores, have forced many homebuyers to turn
to the less-restrictive FHA loan, he says.
huge benefit right now is the ability to still get into a home with a low down
payment,” says David Doerr, a mortgage consultant with Wells Fargo Home
Mortgage in Salt Lake City. “That’s the reason why FHA has gone from 3 percent
of the market a couple of years ago to 50 percent of the market today.”
things may be changing. “There’s a great incentive to buy right now as there’s
a proposal out there to change the FHA loan program to require increased down
payments, higher credit scores and more expensive FHA insurance premiums,” says
Councilman. Still, it takes an act of Congress to change FHA loan requirements,
and it may be some time before FHA tightens the reins.
Here are seven things to know
about getting an FHA loan today:
“For a kid who just finished college and has nominal credit, a
parent can co-sign. Then, once the kid is in better financial shape, he or she
can assume the loan without having to refinance to possibly higher rates,” he
“Some counties have loan limits below $300,000 while others have
limits as high as $729,000,” says Councilman.
Councilman says, “Fannie Mae and Freddie Mac’s qualifying debt
to income ratio is approximately 28 percent (percentage of gross monthly income
used to pay housing costs) to 36 percent (the percentage of income that goes
toward paying all recurring debt payments including housing); FHA’s starting
ratio is 31 percent to 43 percent. They also want income documentation to prove
you have a stable source of income before approving the loan.”
a moderate-income buyer who can’t afford a large down payment, an FHA-insured
mortgage loan can be a viable option.
Tracey C. Velt - To view the original article click here