The beginning of the week it was announced that the House & The Senate were trying to come up with a "Better FHA Loan" Some of you were concerned that this would be another "Sub-Prime" problem in the future. As a Mortgage Banker for over 35 years I must tell you that nothing is farther from the truth. Let's consider the FHA Loan and it's guidelines:
FHA borrowers must have jobs. The income must be verified and the debt ratios must be met. Job stability is another factor in approving an FHA loan. Payment history (rent ) is also a major plus in dealing with the FHA borrower. Pay stubs, bank statements,and co-maker's ability to give any gifts must also be well documented. Most FHA loans are fixed rate 30 years and FHA ARM loans have a history of being at or below the 30 year fixed rate. No FHA loan has a Pre-Payment penalty, and none have Balloons. In general the FHA borrower was not a "Credit Criminal" but simply young couples who could not afford to put 10-20 % down on an average home of $300,000. Many were First Time Home Buyers! All FHA loans are assumable(this is a good selling factor for you Realtors to know when you take a listing). I take Great Exception when the FHA borrower is miss-understood as someone who makes little money, has a history of bad credit,and cannot qualify for a "NORMAL" loan. True the FHA is more willing to except borrowers who may not have had perfect credit, but only after that "Less Than Perfect Credit" can be explained and documented away. Even Realtors would tell me that their Sellers would not take an FHA commitment. This line of thinking must change in 2008. If the FHA limits are increased and down payments reduced or at present levels,this may be the lift we all need. No, the FHA loan is not a SUB-PRIME loan. You need more that a CPA letter and/or a business License to get approved. You can't state the income and there are no BALLOONS to burst here. Yes,FHA could be the the governments answer, but remember this. The FHA is only one of a very few government programs that actually makes money. In a way it would be the government helping itself.