FHA Financing Is Reviving

August 9, 2008

Recent improvements in FHA mortgages (those insured by the Federal Housing Administration) have made them much more attractive and accessible to many home buyers and owners who want to refinance their mortgage. In fact, the growing popularity of these mortgages has pushed their share of all mortgage applications to more than 10 percent, according to a report carried on the LenderLicense.com Website. The number of FHA mortgage applications since last September is more than the total for all of last year.

The latest FHA activity report shows mortgage applications running at a 2.1 million annual rate, compared with an annual rate of about 778,000 in the same period last year. "FHA mortgage applications are up since the loan limit was increased and more people became eligible," said Mary Trupo, Public Issues Director of the National Association of Realtors. "Also, the loosening of some red tape-bureaucracy has made the process more user-friendly, thus adding to increased use. And because some rules have been eased up in regards to refinance mortgages, they are on the uptake."

An informational brochure about FHA mortgages, produced by NAR and the Department of Housing and Urban Development (HUD), includes information about the recent changes and improvements. One change is the elimination of the gift restriction on down payments. Now a buyer’s entire down payment can be a gift from a family member, employer, charity or local government entity, it’s stated in the brochure. Also, a seller can now contribute as much as six percent of the home’s price toward closing costs. This helps buyers who may have limited cash on hand to compete the purchase, it was noted. Yet another user-friendly improvement in FHA mortgages is giving buyers who don’t have a credit history the opportunity to become a homeowner. An FHA mortgage applicant cannot be turned down for mortgage financing based solely on lack of credit history.

The brochure, produced by NAR and HUD, is titled "FHA Improvements Benefit You." It’s part of NAR’s "Shopping for a Mortgage?" brochure series, and it’s the first time the NAR has partnered with HUD in producing such a consumer-oriented educational piece.

Posted in Real Estate