Real Estate Resource

When I began my real estate career in 1985 in Eugene, OR, FHA (Federal Housing Administration) loans were a mainstay of everyday financing.  I “cut my teeth” on government loans.  Once I moved my business to Portland in the early ‘90’s, I found a lot of resistance (mostly from Realtors) to both FHA & VA (Veterans Administration) financing.  But, both FHA & VA loans have become easier to work with and here are some reasons why FHA financing is looking even more attractive in today’s mortgage marketplace:1)       FHA is one of the best loan’s available in today’s market.  Contrary to popular opinion, FHA is now for everyone, not just the low income borrower.  Many areas of the country now have new FHA loan limits and is relevant to a much wider spectrum of home buyers.  There are no income limits.  Rates and terms are good.  FHA allows a 97% LTV (loan to value) and this carries over to the new FHA jumbos (loan amounts over $420,000) until year end.  And, this 3% downpayment/investment can come from a variety of different sources (savings, gifts, IRAs, 401Ks, etc).2)      FHA is a great loan for the borrower.   FHA is one of the few loans left that is still assumable, subject to the new buyer qualifying.  It’s the only loan that allows the borrower to do a “streamlined refinance” to a lower rate with no appraisal and no qualifying.  The rates are advantageous, there are no prepayment penalties and FHA mortgage insurance is no more expensive than with comparable conventional high-LTV (loan-to-value) mortgages.  3)      There is no reduction in LTV for properties in declining areas.  Conventional financing features a five percent LTV hit for properties deemed to be in declining areas.  In some areas, this is another huge factor in FHA’s power. 4)      FHA is for owner-occupants only.  FHA does require its borrowers to move in within 60 days of closing and stay put for a minimum of one year.5)      FHA is a government program through and through, but it pays for itself and is not funded through tax payer dollars.  It’s not subsidized nor is it a drag on the economy and it’s not a giveaway program.  6)      FHA is very lenient with borrower credit issues.  Depending on the risk level of the entire buyer’s file, the automated underwriting systems will take credit scores in the 550 to 600 range.  Some lenders impose their own minimum credit scores for FHA, however.  FHA allows all alternative credit references (such as utility payment history and insurance premiums), nominal credit and is very lenient in its bankruptcy rules.7)      FHA has expanded its loan products.  There are fixed rate and FHA hybrid adjustable rate mortgages (ARMs).  Also there is a 2/1 buydown option (to pay down the interest rate), buyer must qualify at the Note rate.        FHA is full documentation only.  Stated income and light-doc are not in FHA’s repertoire.  There is, in fact, lots of additional documentation necessary.  But, the additional documentation is what makes the looser credit parameters and generous downpayment requirements feasible.  There is automated underwriting for faster approvals.  9)      FHA has reduced appraisal requirements.  FHA permits an “as-is” appraisal for existing properties.  10)   The new FHA loan limits are set to expire December 31, 2008.  Unless extended by congress, the FHA loan limits will revert back to their previous levels, which is to say they will not be workable for the nations many high-cost areas.  FHA loan limits differ from county to county and for single-family, duplex or multi-plex.  The FHA single family loan limits for Multnomah, Washington and Clackamas counties are $417,750 (loan amount). 

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