2008 and 2009 have been phenomenal funding times for FHA loan financing for buyers purchasing real estate. This is because FHA guidelines are broader, making this financing tool more suited to today’s homebuyers’ needs. FHA guidelines allow the buyer to receive gift funds for their down payment/closing costs, which is what many first time home buyers are doing these days.

Prior to FHA financing’s comeback, conventional loans were the tool of choice for first time home buyers because they could choose “piggyback financing” – two loans, holding the amount borrowed on the 1^st mortgage to 80% or less, financing the rest in the 2^nd mortgage, thereby eliminating the need to obtain private mortgage insurance which until the past few years was not tax deductible. Automated underwriting made for easy processing of these loans, limiting documentation requirements and making for faster closings.

Now, proposals are moving forward to increase the down payment requirements on FHA financing to at least 5% down. I’ve received word that Fannie Mae and Freddie Mac are reviving 3% down on certain programs for home buyers with credit scores of 680+, because they have a private mortgage insurance carrier that will agree to insure these loans. These programs are priced higher than FHA financing, making it an unlikely substitute if the down payment requirements are raised on FHA loans.

In 2010, the tax deduction for private mortgage insurance is set to sunset. I haven’t heard about any proposal to extend that tax deduction. Guess it’s time to start another letter writing campaign to my elected officials on THAT issue.

Welcome to my world where the new is old and the old is new…it’s like watching professional ping-pong.

See you out there!