Millions of homeowners have taken advantage of flexible terms, low rates
When the Federal Housing Administration (FHA) was formed in 1934 during the Great Depression, no one could have dreamed of the impact this fledgling agency would have on generation after generation of American families who were chasing the dream of homeownership. Yet here we are in 2017, and FHA loans continue to play an important role in today’s housing market, especially for millennials.
The purpose of the FHA has always been to provide a stable home lending alternative to traditional conventional loans backed by Fannie Mae and Freddie Mac, with the goal of increasing the nation’s homeownership rate. In doing so, the FHA created loan programs with flexible guidelines which can make it easier for homeowners to qualify than other loan programs. One such guideline, the low FHA down payment requirement, continues to help millions of first-time homebuyers who are gainfully employed but can’t afford to make a 20% or 10% down payment.
In addition to FHA’s low down payment requirement, FHA Loan guidelines have more generous income and debt limits than many other loan programs. Specifically, the ratio between your gross monthly income and your monthly household debts can be a little bit higher with an FHA Loan. Your FICO credit score can be a little lower as well.
FHA also offers some popular refinance programs, including the FHA Streamline Refinance Program which enables homeowners to reduce the interest rate on their mortgage without an appraisal. We even offer a no closing cost option for FHA streamline refinances which makes it very easy (and inexpensive) to take advantage of lower interest rates.
For those homeowners who want to cash in on rising property values to make home renovations or pay off debt, FHA has a FHA Cash Out Refinance Program which can allow homeowners to access even more cash than a conventional cash-out refinance loan. For more significant home improvements, FHA has a 203k Loan Program which can help you fix up your property right after you buy it. And finally, FHA offers reverse mortgages which help seniors over the age of 62 to obtain extra cash without having to make a monthly principal & interest payment.
Over the years, many housing experts have taken turns over the years predicting that FHA Loans will go the way of the dinosaur and during the subprime lending boom they almost did. However, it was subprime lending that went extinct and when the conventional lending market nearly collapsed, homebuyers flocked to FHA loans. Without FHA Loans, there might not have been a housing market at all.
Nowadays, FHA Loans have become increasingly popular for millennial first-time homebuyers, many of whom are creditworthy but are saddled with student loan debt. For younger homebuyers, FHA Loans are the only option if they want to buy a house and avoid the cost of escalating apartment rent. Serving this segment of the market is going to be crucial if we are to sustain the rally in housing prices. Once again, FHA Loans continue to not only be popular but vital to our nation’s housing market.