May 21st, 2013
Rick Grant in a recent Zillow blog post does a good job looking at the Federal Housing Administration’s mortgage product, the FHA-insured loan, and why it may or may not be right for each buyer.
The FHA-backed loan was established to help certain borrowers, such a first-time home buyers or low-income buyers, get approved for a loan when they otherwise may not. The loan is especially attractive to first-time buyers because it requires as little at 3.5 percent down.
But, as Grant discusses, many people received loans who likely shouldn’t have during the sub-prime mortgage crisis of 2007. This had lead some people to question whether the FHA can handle the stress, as “a study released by the Federal Reserve Bank of New York and New York University in July 2012 estimated that 30 percent of the loans originated by the FHA between 2007 and 2009 would be delinquent within 5 years.”
One component of the FHA loan is borrowers are required to have and pay for mortgage insurance until the loan amount due falls below 80 percent of the total value of the property. But starting in June, borrowers will be required to have that insurance for the life of the loan.
“Some say this will add thousands of dollars to the price of a home for texas and ed young FHA borrowers. Others point to the fact that most people refinance into new loan products about every 7 years, which would allow FHA borrowers to refinance into a conventional loan and possibly avoid mortgage insurance premiums long before their home was paid off,” Grant explains.
The FHA loan has allowed millions of people to fulfill their dream of homeownership, but it may not be for everyone. Contact Acadia Lending today to find out if the FHA-backed loan is right for you.