FHA Loan Products in Limbo
FHA still only offers home financing that only requires 3% down-payments. Clearly, Low down-payments and low rates make FHA enticing to first time homebuyers! Limited or Poor Credit? No Equity…No Problem! You can find advertisements that feature FHA home loans and you can’t help but wonder, is FHA going to replace sub-prime? If non-prime and Alt-A borrowers have no avenues for home loans, many experts believ these types of borrowers will to try to qualify with FHA loans. Now, they’re have been some changes to help avoid this route, but the key difference between FHA and subprime mortgages falls back on the simple issue of income qualifications.
At this point, if you are an applicant considering home-buying, FHA is clearly your best bet to finance a home with a low mortgage rate. FHA was never intended to offer an alternative to shady loan applicants. FHA has always required complete income qualifications, whereas most sub-prime lenders offer “stated income” loan programs that could entice applicants who can’t actually afford the mortgage loan as advertised.
FHA mortgage lending continues to offer incentives such as reduced down payments and limited credit availability, but it also stresses the fact that homeownership is for people who can afford to make their mortgage payment each month. FHA recently eliminated down payment assistance loans. Rumor has it that FHA is even considering lowering the cash out refinancing requirements from 95% to 85% loan-to-value ratios.
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