FHA Loans Are An Important Tool For Today’s Borrowers
November 19th, 2008 categories: Chicago Real Estate News
During the residential housing boom of 2001 through 2006, buyers generally turned toward FHA loans only as a last resort. With easy credit and mortgage lenders asking for down payments as small as 5 percent or 3 percent of a home’s purchase price, most buyers had little reason to turn to FHA loans. A lot of buyers were even qualifying for loans with no down payments.
Today, of course, all this has changed. Low-down-payment loans are largely history. It’s more difficult for credit-challenged borrowers to acquire mortgage financing. Suddenly, the FHA loan is hot again.
Look at these numbers: Real estate columnist Chas Sisk writes here that for the fiscal year that ended Sept. 30, borrowers obtained nearly 1.1 million FHA-insured loans. That’s about three times more than in 2006 or 2007, according to the Department of Housing and Urban Development.
And according to this story in the Atlanta Journal-Constitution, the FHA is insuring more than $24 billion in mortgages every month. That’s up from just $6 billion a month a year ago.
Why are FHA loans suddenly so popular? One of the main reasons is that FHA loans require only a 3 percent down payment. Conventional mortgages today often call for a down payment of 20 percent of a home’s purchase price. That can be a challenging number for some homebuyers to scrape up.
FHA loans also do not require a minimum credit score, another plus for some borrowers. While it may be near impossible for some buyers with less-than-ideal credit to qualify for financing from conventional lenders, they can get a mortgage loan from the FHA.
And to make the loans even more attractive, buyers can now borrow more on a FHA loan. The U.S. Department of Housing and Urban Development on Nov. 10 announced an increase in FHA mortgage loan limits for single-family homes. You can read the department’s official press release here. The FHA will now insure single-family home mortgages up to $271,050 in low-cost areas and up to $625,500 in high-cost areas. The previous maximum loan level for FHA loans stood at just $362,790.
For all these reasons, many lenders are crediting the once-lowly FHA loan with keeping the mortgage-financing business afloat during the nation’s credit crisis.
If you’re struggling to acquire a conventional mortgage loan, talk to your REALTOR® about the FHA alternative. You’d certainly be in good company should you decide to go with one of these loans.
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