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Take Advantage of Great Deals on FHA Loans While You Can

06/23/2010
Who's offering the best deal on home purchase mortgages? David Stevens of the Federal Housing Administration (FHA) says that right now, the FHA is.

In Stevens' own words, the FHA is currently "the largest source of home purchase mortgages in the nation." Data from the first quarter of 2010 reveal that the FHA accounted for a whopping $52 million worth of home purchase mortgages. To help make sense of the enormity of that figure, it means the FHA has surpassed Fannie Mae and Freddie Mac by nearly $6 billion.

The FHA is a key player in the mortgage market right now; a position the FHA hasn't held for nearly 60 years. The FHA's dominant role is significant for anyone interested in purchasing a new home and here's why.

That the FHA has become such a dominant player actually concerns Stevens and other industry experts. Stevens believes that right now the housing market is operating "purely on life support" thanks to the federal government. A story appearing in financial-news oriented Bloomberg News explains that the FHA home loan programs prominence translates into a weakened mortgage system.

In terms of selling easier loans, that has traditionally been Fannie Mae and Freddie Mac's role. In terms of lowest mortgage rates of interest again, it's traditionally been these agencies as well as other lenders. Up until recently, FHA loans made up only a very small part of the housing market, about four percent. Over the past 20 years, FHA loans have never exceeded 15 percent.

Although the news sounds dire, the situation actually benefits typical homebuyers. FHA loans require a down payment of only 3.5 percent to those who qualify. That's likely the lowest rate out there right now. However, putting down a minimal amount means many of these borrowers have to purchase private mortgage insurance (PMI), which can be costly and hard to find. PMI is almost always required whenever a down payment less than 20 percent is made.

Other FHA mortgage costs

Because the percentage of past due FHA mortgage loans is nearly equal to past due sub-prime mortgage loan rates, which currently runs about 12 percent, the upfront fee on an FHA loan has been raised to 2.25 percent of the amount borrowed. Additional borrower costs include annual premiums and mortgage insurance. The goal of these fees is to help reduce the number of properties that enter foreclosure.

Even with these fees, a low-down payment FHA loan is a mortgage option that should not be overlooked. Apply now and you could turn your homeownership dreams into reality!

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