HomeReport
Real Estate & Finance News That Affects Your Home                                                                            Page  1 2 3 4

AUGUST 2009 - Page 3

TREND SPOTTING FHA Loans May Be Key To Today's Housing Recovery If you're looking for a mortgage, consider the advantages of a Federal Housing Administration loan. In 2006, FHA loans accounted for just 3% of total dollar volume in home loans whereas today they comprise 20% of that volume. In fact, FHA loans are easier to find than ever given the 500% increase in authorized FHA lenders since 2007. FHA loans are attractive for a number of reasons: Lower interest rates. FHA loan rates recently have often been lower than rates for conventional loans, and the rates do not vary according to the borrower's credit score. Lower credit-score requirements. As of this writing, FHA's minimum required credit score was set at 620 (though exceptions are sometimes made for borrowers with still lower scores). Applicants do not necessarily have to have a long credit history nor a perfect one -- one or two late payment incidents may be acceptable. Small down payments. FHA's minimum down payment requirement is 3.5%. Inexpensive refinancing. If interest rates drop, FHA loan holders can usually refinance to another FHA loan easily and at lower costs than with conventional loans. Loan modifications more accessible. The FHA has a solid track record of working with borrowers who fall behind on their payments, providing loan mitigation plans to help them stay in their homes. No income restrictions. Though traditionally geared to low- and middle-income home buyers, higher-income borrowers can also qualify. Be aware there are certain limits and costs associated with FHA loans: Loan limits. The size of FHA loans written in 2009 for single-family homes is limited to the greater of 125% of the 2008 local area median home price or $271,050, except in designated high-cost areas where the maximum loan size is capped at $729,750. (Give us a call to find out what the FHA loan limit is for the area where you intend to purchase a home.) Mortgage Insurance Premium (MIP). Depending on the type of FHA loan (purchase loan, standard refinancing or streamlined refinancing), FHA charges an "upfront" MIP of 1.5% to 1.75%, which can be paid in cash at closing/settlement or financed in with the loan amount. In addition, borrowers pay a monthly .50% to .55% MIP (about half a percent) with their mortgage payment. Be sure to compare the costs of an FHA loan with those of other loan programs available to you.                                                                                                                                                                                                                             Page  1 2 3 4