I can remember a time in the not too distance past when FHA was the ugly sister to the slick conventional mortgage products.
For all practical purposes it was logical. Conventional mortgages are far easier to process due to less demanding underwriting procedures.
Conventional mortgages allowed drive-by property valuations whereas FHA wanted the appraiser to go inside and out.. And take note of repairs required by FHA.
FHA catered to first time home buyers with little down payment and somewhat sketchy credit, like many young people.
Mortgage brokers had a big selling point in that interest rates for FHA were comparable to the conventional mortgages.
This financial mess we’re in started in the ’90s. I can remember lenders relaxing conventional underwriting requirements. It go to the point when the lowest down or zero down conventional loan was the way to go.
If I was a betting man I’d say lenders wouldn’t mind a do over right about now.
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.
Most conventional loans require at least 10% down now. FHA does and always has required very light down payment. To be more precise three percent is all that is required.
Additionally, FHA is pretty easy on credit as well.
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 point is FHA is a great option in a time when privately insured mortgages are pulling back the reigns like a frightened Lone Ranger.
Though they may have been poo pooed, FHA loans are now rightly main streem.
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