FHA Loan Programs Just Got Better

FHA Loan Programs Just Got Better

The Federal Housing Administration’s loan program, eclipsed during the years of soaring real estate prices and various no-money-down mortgages, is fueling new lending.

Mortgage brokers say that the FHA program, in which the federal government’s guarantees make loans more affordable, accounts for the vast majority of their business. That’s become increasingly true as credit markets tighten and conventional mortgage guidelines become more restrictive.

With conventional lenders demanding down payments of 5% or 10%, the 3% down payment required by FHA has become a bargain.  Another advantage of the FHA loan program is that home buyers can use a cash gift from a family member to make the required 3% down payment

The FHA program never went away. But during the boom, market dynamics made the program far less relevant. Borrowers could get mortgages without any down payments. And rising home prices put most deals off limits to FHA guarantees, which were capped at $362,790.

Under the federal housing law that was just passed, the cap on FHA loans has gone up.  The cap now varies according to the prevailing home prices in each region. The bill also allows the FHA to provide up to $300 billion in new guarantees to help “at-risk” homeowners move into more affordable loans.

The measure could help up to 400,000 borrowers, but it applies only to primary residences. Second homes and investment loans don’t qualify. The existing lender would have to agree to a “substantial write-down” of the amount of the mortgage. Borrowers who believe they could qualify should contact an FHA-approved lender.

 

Contact Information

Photo of Laurel Sweeney Real Estate
Laurel Sweeney
Berkshire Hathaway HomeServices Nutshell Realty
1209 State Route 213, PO Box 452
High Falls NY 12440
Office: 845-687-2200
Toll Free 877-468-5783
Fax: 845-687-4162

© 2016 BHH Affiliates, LLC. An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.®.  Equal Housing Opportunity.