The Power of FHA Loans in a Tough Mortgage Market

If you are not familiar with the Federal Housing Administration (FHA) it is time to take a closer look at what they do and how they can help mortgage borrowers. In recent times the FHA has made many internal changes to adapt itself to a wider market of consumers.

Twenty years ago the FHA had roughly 15% of mortgages for the home purchase market. Watching the FHA prosper during the 1990s was interesting to watch as federal mortgage loans were becoming more appealing to a larger segment of the population. Unfortunately, the FHA they lost a tremendous amount of market share to subprime lending institutions offering low interest rates and flexible loan programs to risky borrowers. Many of these borrowers would have qualified for FHA programs, however some choose adjustable rate mortgages, complicated Option ARM programs, and found themselves in being the victims of aggressive mortgage brokers and banks. Where are those subprime lenders today? Many are out of business or have been acquired by larger financial institutions due to increasing foreclosures as interest rates increased.

During this time the FHA has remained strong and gaining back market share. During 2006 when the FHA hit a low point of less than 4% market share for US mortgage loans, it was obvious that lenient underwriting and lending regulations is what consumers wanted. As a result, borrowers foreclosed on properties, lenders disappeared, property values dropped, and obtaining mortgages or refinancing became a difficult task.

In 2009 the Federal Housing Administration has made a comeback. Their market share of US loans written has increased back to 15% for new home purchases. Additionally, increased FHA loan limits have encouraged borrowers to finance homes of higher value in hopes of market appreciation. This strategy was put in place to stabilizing pricing in the housing market. The FHA has also put in place the following measures to bring faith back to mortgage borrowers:

1: Increasing loan limits for both single family and multi-family units.

2: Flexible down payment requirements.

3: Acceptance of lower credit scores and forgiveness for previous bankruptcies and foreclosures.

4: Reduced or eliminated mortgage insurance.

5: Competitive interest rates and lower APRs for fixed rate loan products.

Consumers are clearly in a power position when seeking an FHA loan in comparison to private lending institutions. As our economy is slowly rising from the mortgage crisis of the past few years, FHA loans are becoming the solution for many borrowers today. FHA mortgages will even allow a borrower to “streamline” refinance a loan when interest rates drop with no appraisal required. FHA mortgages are truly helping individuals get back on their feet and put money back into real estate again.

Author: Nicholas Cuttonaro
Article Source: EzineArticles.com
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