2009 has seen 30 year rates on home loans drop to record lows, and homeowner bailout programs and housing stimulus plans have only made it more attractive to apply for an FHA mortgage.
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FHA Home Loans Growing In Spite of Housing Slump
With an estimated $290 billion in FHA loans projected for fiscal 2009, it's clear that while conventional lending markets are hurting the FHA is meeting a serious need for affordable home loans. According to recent press, FHA mortgages tripled in 2008; in 2009 the amounts are expected to be even higher. 2009 has seen 30 year rates on home loans drop to record lows, and homeowner bailout programs and housing stimulus plans have only made it more attractive to apply for an FHA mortgage.Some of the most recent developments are the most helpful. First-time home buyers and home owners have heard plenty about the Obama mortgage, but the latest news is even better for many currently in the market for their first home. On May 29, U.S. Housing and Urban Development Secretary Shaun Donovan made it official; home buyers can use their 2009 First Time Home Buyer's Tax Credit (also known to some as the Obama tax credit) as a down payment on their FHA home loans.
This is done by monetizing the tax credit through a short-term bridge loan which is applied as a down payment on the FHA loan; the larger the down payment, the lower overall cost of buying that first home. According to the U.S. Department of Housing and Urban Development, FHA borrowers are now permitted to apply the 2009 tax credit to the down payment above and beyond 3.5 percent of the appraised value or the borrower's closing costs.
What's the advantage in doing so? FHA home loans already have low down payment requirements compared to conventional loans, but using the 2009 First Time Homebuyer's Tax Credit means FHA borrowers could achieve lower interest rates as a result, saving money over the lifetime of the loan.
These advances and pro-home owner incentives are part of the reason origination of FHA loans has skyrocketed in 2009; they're also the reason why HUD is requesting even more money for next year's expected flood of FHA loan applications. Another reason for the increased interest in FHA mortgages? Conventional loans are harder to come by. Credit requirements and other issues connected with conventional loans make the housing market even more competitive; FHA home loans with their lower down payments and more forgiving credit requirements offer greater opportunity to get into that first home even in a stressed-out economy.
The U.S. Department of Housing and Urban Development is requesting authority to use up to $400 billion dollars in 2010, the equivalent of more than $2 million in loans. Compare those figures with FHA loan numbers from previous years; in 2007 lending volume was at a mere $60 billion. The requested $400 billion in FHA loan money for 2010 makes the 2007 numbers look positively anemic.
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