Lately many of you may have seen the demand in FHA Loan requests or the requests for FHA financing begin to increase. Many of you with listings will start hearing the question can this house be financed FHA? I wanted to take a moment and give some reasons why you will be seeing a resurgence in the demand for FHA Loans. In years past the FHA loan almost became almost extinct, it was something that there were so many alternative loan programs that allowed for financing that finding an alternative attractive loan sometimes at a better rate was possible. Many of those programs are no longer available and the ones that are available many times have new fee schedules determined by Credit Score and Risk.
Basically anyone with a middle credit score below 680 could see a slightly increased rate compared to say a 700 credit score when you are talking about a conventional loan, the term in the mortgage business is called risk based pricing and the new fees began to appear at the beginning of 2008 as set by Freddie Mac and Fannie Mae. We have received word that the fee schedules are going to change again this time Freddie has announced a new premium for credit scores below 740 and Loan to values above 80%, while this seems excessive to many of us and that is yet to happen (scheduled for June, 08), what it boils down to is a increase in the cost of home financing on the conventional side of the equation.
With the FHA insured mortgage the risk based price and the fees that we see increasing on the conventional side do not apply, there would be no increase in rate or costs where credit scores are concerned, which makes FHA product become the attractive alternative.
I hope this clarifies some things about the market, it would be wise to anticipate the FHA question if you have a home or a listing, because it will open the possibility of a wider customer base if the home is able to be financed FHA.
Darren Stewart
OakStar Bank
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