Since I started in the mortgage business back in '97 government mortgages have played second fiddle to conventional mortgages.
For all practical purposes it was logical. Conventional mortgages are far easier to process due to less demanding underwriting procedures.
A good example was the inside and out appraisal required by FHA. Why would a lender want to chance that when they could avoid it with a conventional mortgage?
FHA catered to first time home buyers with little down payment and somewhat sketchy credit, like many young people.
First timers could get, with FHA, a highly competitive interest rate loan. It even had lower down payment requirements than the conventional loan.
Even as early as the late '90s lenders began reducing restrictions on mortgage underwriting. This financial fiasco started long ago. It was not long after 2000 that even zero down conventionals were better than FHA.
I imagine the mortgage companies would like a redo at this point.
Of course, we all know what happened. The bottom dropped out, 100% financing went away, the sub-prime market is gone, and alt-A products are not even close to what they once were.
What does that leave the consumer. It leaves them one hell of a product in an FHA mortgage to purchase a screaming deal (there might be few of them coming up soon) or to refinance out of a sub-prime.
So, why go FHA. Well, to begin you don't need a big down payment. Many people don't have that now. The typical FHA mortgage requires 3% down payment.
And credit is based on payment history rather than scoring.
This is a boon to some because a lot of people are just creating their credit history or are just getting back on their feet after a good beating.
A ton of folks have had their credit scores pummeled over the last 24 months.
The truth is these loans have always been a great option. Now that conventional mortgages are far more conservative Fha is a great option.
Though they may have been poo pooed, FHA loans are now rightly main streem.
For all practical purposes it was logical. Conventional mortgages are far easier to process due to less demanding underwriting procedures.
A good example was the inside and out appraisal required by FHA. Why would a lender want to chance that when they could avoid it with a conventional mortgage?
FHA catered to first time home buyers with little down payment and somewhat sketchy credit, like many young people.
First timers could get, with FHA, a highly competitive interest rate loan. It even had lower down payment requirements than the conventional loan.
Even as early as the late '90s lenders began reducing restrictions on mortgage underwriting. This financial fiasco started long ago. It was not long after 2000 that even zero down conventionals were better than FHA.
I imagine the mortgage companies would like a redo at this point.
Of course, we all know what happened. The bottom dropped out, 100% financing went away, the sub-prime market is gone, and alt-A products are not even close to what they once were.
What does that leave the consumer. It leaves them one hell of a product in an FHA mortgage to purchase a screaming deal (there might be few of them coming up soon) or to refinance out of a sub-prime.
So, why go FHA. Well, to begin you don't need a big down payment. Many people don't have that now. The typical FHA mortgage requires 3% down payment.
And credit is based on payment history rather than scoring.
This is a boon to some because a lot of people are just creating their credit history or are just getting back on their feet after a good beating.
A ton of folks have had their credit scores pummeled over the last 24 months.
The truth is these loans have always been a great option. Now that conventional mortgages are far more conservative Fha is a great option.
Though they may have been poo pooed, FHA loans are now rightly main streem.
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