With the basic elimination of sub prime and ALT A loans, FHA loans have regained popularity over the past several months and should continue to gain share in the coming months. FHA loans were once the "king" of loans during much of the 1980's into the early 1990's. FHA loans fell out of favor during the 1990's with therise of interest only, 80/20 and sub prime loans that allowed true 100% financing.

FHA loans made up close in excess of 40% of all loan volume during the 1980's and early 1990's but fell to less than 6% of all loans originated in the U.S. by the mid 2000's. Agents and loan officers chose the easy route with minimal documentation and simpler appraisal requirements.

Today, FHA loans now account for over 35% of all loans originated in U.S. as their guidelines have come more in line with conventional guidelines. However, they have also taken over much of the share that once was garnered by their conventional brethren. FHA still allows for 100% gift funds, credit scores below 620 and even below 600 in some cases with no real differences in interest rate. FHA allow for 6% seller contribution which can be used to buy down the borrower's start rate as well as pay some of not most of their closing cost. FHA also has some attractive ARM programs which have only 1% annual adjustment caps. My personal favorite today is the 5 year ARM that current starts below 6% and if you add a
2/1 buy down your borrower could have a starting rate of BELOW 4% with positive amortization.
Today, a borrower could have a start rate of 3.875% year 1, 4.875% year 2 and 5.875% for years 3-5!!! The worse your borrower could be at in conventional year 6 is 6.875%.!!! Why would you take a fixed ratetoday!!! The average for the next 6 years , worse case, is 5.542%!!! FHA loans have a streamline refinance clause that allows borrowers to refinance with little documentation to a lower payment as long as they have made their current payment on time.

Rumor has it that Atlanta's generous FHA loan amount might be lowered by January 1 to under $320,000. Now is the time for potential buyers in the mid $300K range to act and take advantage of all that FHA loans have to offer to them. Home prices are at their lowest levels in years, start rates at 3.875% or lower, marginal credit OK, 100% gifts OK, and mid $300K loan limits....can their be a more perfect time to buy!!