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FHA LOANS- THE PERFECT FIT?

By
Real Estate Agent with eXp Realty

Recently we've been seeing and reading about the housing market slowly making a comeback; that is, more real estate transactions are being closed now than they did a year ago.

The Federal Housing Administration (FHA) plays a key role in the "turn around" we're currently experiencing. FHA really isn't a type of loan, it's actually insured loans that the Federal Housing Administration has agreed to reimburse the lender for financial losses, if the borrower default on the loan.

For buyers that are unable to qualify for conventional loans, FHA mortgages are more attractive, and the terms of the loan are more flexible.  These loans are mostly used by first-time homebuyers and buyers with less than perfect credit; or buyers that have low to moderate income.

Some disadvantages of FHA loans are that there is a cap on the maximum amount you can borrow. More importantly; there has been a recent increase in the cost to obtain FHA insured loans. As a FHA borrower, you pay an upfront lump sum premium at closing to insure the loan, along with an annual premium. The upfront premium has recently been increased to 2.25% which is the maximum by law.

Also, if you are considering buying a condo unit, keep in mind that only 30% of the units in a condo building can be financed with FHA insured loans, and 50% of the total units in a condo building must be sold before FHA will "ok" any loan.

Before looking at potential homes that may meet your needs and lifestyle, make it a point to sit down with your lender and take into consideration the type of loan that is best for you and your situation. Even in today's real estate market loans can still be uniquely tailored to fit you.

Here is a chart that shows the most current real estate stats for the number of homes for sale in Broward County Florida.

Market Trends (BrowCty)

 

Cameron Novak
The Homefinding Center - 1000 Palms, CA
Real Estate Broker since 2008

I like the FHA product, but the up front penalties are getting out of hand. (i.e. increased pmi, etc.)

May 22, 2010 04:45 PM
Kymberly Caldwell-Muniz
(909) 973-0410 - Fontana, CA
TCR Group Keller Williams Realty Rancho Cucamonga

I work alot with FHA I haven't been having too much drama with them, for me it is the banks. Nice post and good information.

May 22, 2010 05:10 PM
Bryan Watkins
LRA Real Estate Group - Mesa, AZ

Very nice info and graphs. I am just closing an FHA loan and house. I love every lender who can close a deal.

May 22, 2010 05:12 PM
John Pusa
Glendale, CA

Adell, FHA has very good loan program, and helped may home buyer to purchase homes.

May 22, 2010 05:55 PM
Billi Evans
Murney Associates - Springfield, MO

In my area, I can't imagine where the market would go without FHA loans. Good points.

May 22, 2010 06:30 PM
Adell Forbes (REALTOR®)
eXp Realty - Atlanta, GA
"Knowledge & Experience Working for You"

Thank you for the comments and feedback everyone. In my opinion FHA has been a life saver (esp in the current real estate market) in regards to helping prospective homeowners become actual homeowners.

I am truly grateful for FHAs assistance because it benefis everyone involved.

Have a GREAT week guys!

Adell

May 24, 2010 04:11 AM