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Help for Maryland and Virginia First Time Home Buyers. FHA LOANS ARE HERE TO STAY - I HOPE!!!

By Lenn Harley

Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

December 05, 2012 06:43 AM

FACTS ABOUT FHA LOANS.

The warnings that "FHA loans are on their way out" continue.

They very well may be. Ricky Beach's post Goodbye FHA Loans resembles so many posts I read with the alerts about FHA loans.

Many, as does Ricky, relate the high costs for MIP. Very true and FHA can no longer make any claim that would describe the FHA loan as less costly when compared with other loan types. Alert

Sadly, the high cost of the FHA loan today is to rectify serious mistakes made by Congress in the past by authorizing FHA to reduce the MIP to an actuarial miscalculation. Unlike the claims made by FHA, Congress and many mortgage lenders, the deficit in the FHA insurance fund was not caused by defaults, it was caused by an artificially low MIP.

With any insurance coverage, the premium should be based on actuarial models of RISK. Risk was not considered when Congress authorized the FHA to lower MIP to below 2% for some years and watch the deficit accumulate.

NOW the rate and premiums will increase to replenish the insurance fund.

Fact is, today's FHA borrowers and those in the future are going to pay for the benefits received by past FHA buyers.

WHAT IS THE ALTERNATIVE? I have yet to see a blog post warning about the FHA loan that offers a viable alternative.

Give us an alternative loan that will permit credit scores of 620, 640.
Give us an alternative loan that will permit a DTI* competitive with FHA.
Give us an alternative loan with better DTI* and credit scores that doesn't have a limit on income as do many of the state bond programs.

THAT IS WHY FHA LOANS WILL CONTINUE TO BE AN ALTERNATIVE TO CONVENTIONAL LOANS.

*DTI - Debt to Income ratio.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

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Dick Greenberg

New Paradigm Partners LLC - Fort Collins, CO

Northern Colorado Residential Real Estate

Hi Lenn - It seems to me that the entire concept of actualrial risk has been discarded. In FHA's case, it was to artificially lower the rate, but insurance companies and others today are going the other way - raising rates to maintain a profit target when their actuarial models fail due to natural disasters or mathematical ineptitude. Either way, the effect is the same - the consumer gets shafted.

Dec 05, 2012 06:58 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Dick. I agree of course. However, to this day, no loan officer has given us an alternative to the FHA loan.

Dec 05, 2012 07:01 AM

Lou Ludwig

Ludwig & Associates - Boca Raton, FL

Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Lenn

A FHA mortgage is the financing of choice for most first time home buyers, the truth is congress is not thinking through a lot of their action and what the impacts are, in this case to first time home buyers.

Good luck and success.

Dec 05, 2012 07:22 AM

Jay Markanich

Jay Markanich Real Estate Inspections, LLC - Bristow, VA

Home Inspector - servicing all Northern Virginia

I have understood that sellers have harder times with FHA loans because of the gubment inspections. Is that not true?

Dec 05, 2012 07:56 AM

Lou, Lou, Lou. Congress thinking is an oxymoron.

Jay. No. That is not true. Back in the early 2000s, FHA appraisers had a sort of worksheet that they used and made certain matters, primarily chipping and peeling paint (lead based) and old worn out roofs a "condition" of the appraisal. VA does the same thing and we just got the same "condition" on a 20% down loan for the little house on Berlin Tnpk.

Dec 05, 2012 08:07 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Lenn I agree that FHA will be around for a long time for the reasons you gave and others. But if the proposed FHA changes are implemented, their market share will go down, because many of the Borrowers that can qualify for a conventional mortgage will most likely choose to go that way now. FHA really does not care if their market share goes down, because they never wanted it to be as high as it is now. If they go through with these changes they will basically end up at the market share that they should be at anyway.

Dec 05, 2012 08:22 AM

George. I realize that. My purpose here is simply to refute the many articles by loan officers who state with a high degree of certainty that FHA IS DEAD or soon will be.

That is simply not true.

I surely want it in my arsenal for buyers who need it.

Dec 05, 2012 08:24 PM

Help for Maryland and Virginia First Time Home Buyers. FHA LOANS ARE HERE TO STAY - I HOPE!!!

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