June 10, 2009
There are approximately $290 billion in FHA loans projected for 2009. While indicators show conventional lending markets are still feeling the effects of the housing slump the FHA has taken a larger role in helping consumers get affordable home loans. FHA mortgages have grown at a surprising rate–they tripled in 2008 and in 2009 those numbers could go even higher. 30-year rates on home loans have fallen to record lows; homeowner bailout programs and government stimulus packages make it even more attractive to buy a new home using an FHA-insured loan.
Some of the most recent developments are making those on the fence about buying a new home in this economy give FHA loans a second look. In late May 29, the Department of Housing and Urban development announced a new plan allowing home buyers to use their 2009 First Time Home Buyer’s Tax Credit (also known to some as the Obama tax credit) as part of a down payment on their FHA home loans. The plan lets buyers monetize the 2009 first time home buyer tax credit using short-term bridge loans from authorized agents. The loan is applied as a down payment on the FHA loan; the larger the down payment, the lower overall cost of buying that first home. According to the U.S. Department of Housing and Urban Development, FHA borrowers are now permitted to apply the 2009 tax credit to the down payment above and beyond 3.5 percent of the appraised value or the borrower’s closing costs.
FHA home loans already have low down payment requirements, especially when you compare the down payments needed on a conventional loan. Buyers who take out FHA home loans and apply the money from a 2009 First Time Home buyer’s Tax Credit means FHA borrowers could achieve lower interest rates and save over the lifetime of the loan.
FHA loans skyrocketed in 2009 thanks in part to incentives like this. In anticipation of even greater interest in FHA mortgages, HUD is requesting even more money for an expected flood of FHA loan applications in 2010. Interest in FHA home loans increases whenever conventional loans are tougher to get. Credit requirements and other issues connected with conventional loans make the housing market even more competitive, but FHA home loans feature low down payments and more forgiving credit requirements–home buyers have an affordable opportunity to purchase a first home even in a stressed-out economy–thanks to FHA loans.
The U.S. Department of Housing and Urban Development wants to issue $400 billion dollars in 2010, and HUD has requested the authority to help buyers use the equivalent of more than $2 million in loan guarantees. In 2007 lending volume was much lower, around $60 billion. The requested $400 billion in FHA loan money for 2010 makes the 2007 numbers seem tiny by comparison
More people than ever are choosing FHA loans, FHA refinancing and FHA reverse mortgages. No one knows what additional help could come for first time borrowers or whether there will be an equivalent first time home buyer’s tax credit for 2010. In the current housing market, now is definitely the right time to explore FHA loan options.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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