FHA loans becoming more prominent

July 10, 2009
Matt Isleib

 

This should come as no surprise but in a recent report from the Mortgage Bankers Association FHA loans currently are at the highest percentage of mortgage originations in 19 years. Government backed loans accounted for roughly a third of mortgage origination in June.

The reason behind the surge in FHA loans is a change in the market. The sub-prime mortgage industry is all but gone and conventional Fannie or Freddie loans have tightened back so far that if there is any inkling of a low down payment, FHA is your only choice.

In prior years conventional loans had 97 percent and even 100 percent options for financing but no more. Conforming loans are starting at a 90 percent loan to value or a 10 percent down payment. If you need financing that requires less than a 10 percent down payment FHA is the route you need to go. Any loan with a down payment of 10 percent or more and a conventional Fannie Mae or Freddie Mac loan is your best choice.

Another thing to keep in mind is with FHA loans you can use the $8,000 first time home buyer credit towards your down payment. IT DOES NOT mean that if you have no money to put down you can just use the $8,000 in lieu of. You will still need at best 3.5 percent of your funds as down payment but if you chose to can use the $8,000 as well.