FHA/VA - The New Sub-Prime?
This entry was originally posted back in April, before all the heaviest fall out from the sub-prime debacle. Now with the housing bill, the demise of seller-funded DPA, etc., the topic seems a bit silly. FHA has become a less available option for buyers that used to qualify for subprime due to all the new underwriting rules and guidelines instituted by the federal government to protect Fannie Mae and Freddie Mac. There may never again be a "new sub-prime" market!
Well you would have to be a hermit not to have heard all the fallout the last 12 months from the destruction of the sub prime lending industry. Last Spring, during one week I heard there were 6 different lenders that went bankrupt within that seven day period! Unfortunately, the sub prime debacle had some bad effects on our market overall, extending a period of price aggressiveness beyond all comprehension, putting many real estate markets around the country out of the affordability reach of most buyers. This has in many ways exacerbated the slow down in the real estate industry by now severely limiting the number of qualified buyers in most markets around the country.
Hooray for the feds! They have once again come to the aid of the common man by relaxing some of the stringent requirements around FHA and VA loans in order to stimulate the real estate buyers to stay in the market and the strategy IS working. Last week, they also increased the FHA funding limits within the Round Rock area to $288,750 which will pave the way to more expensive housing now being funded by FHA, so the move up that you have been desiring may now be possible! FICO credit scores all the way down to 580 are eligible for the best FHA rates. FICO scores as low as 550 will be considered for a slightly higher rate. This also makes it possible for a lot more homeowners to refi into a great FHA rate.
There's every reason to believe 2008 will be a great year for Real Estate in Central Texas. There is a pent-up demand for housing in Central Texas that has to break loose soon. The local economy is booming, and people are moving here in ever increasing numbers. The overwhelming majority of borrowers can get financing when it's time to buy a home. And we all know what a wonderful place this is to live. So my advice is make that move NOW.
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