Benefits of FHA over Conventional Loans

An FHA Mortgage might just be your ticket to owning your own home!

Falling interest rates are putting home ownership in reach for millions who otherwise would have been shut out.  But many others do not have enough money for a down payment and closing costs.  If you fall into that category, make a note to look into FHA mortgages.  The Federal Housing Administration has helped many first-time buyers get houses almost half a million in 1996.

You can spend up to 29 percent of your gross monthly income on housing and up to 45 percent on overall debt with FHA.  Those ratios are a bit more generous than what is offered on conventional mortgages and the down payment required with an FHA insured mortgage may be as low as 3.50 percent. 

FHA also permits the buyer to use a gift of 100 percent from an acceptable donor, such as a family member.  They allow the sellers to provide contributions for closing costs, pre-paids, origination fees and discount points up to 6 percent of the sales price.  You will have to pay monthly mortgage insurance with an FHA backed loan.

Interest rates for FHA mortgages are generally the same as the rates for other loans, but thanks to the Federal Housing Administration, the dream of actually owning a home can become a reality.

To get the wheels of your dreams turning toward the reality of your very own home, contact me to get pre-qualified and review the remaining information below for more details on why FHA might be right for you.

The major difference is in how FHA looks at loans. FHA tries to figure out how they can make a loan work whereas Conventional Lenders try to determine what an acceptable risk is. 

HUD Secretary Interview Secretary Jackson talks with MortgageDaily.com By: Patrick Crowley, Mortgage Daily.com September 27, 2006

In an exclusive interview with MortgageDaily.com, U.S. Department of Housing and Urban Development Secretary Alphonso Jackson talked about what's right at the Federal Home Loan Banking System and what is wrong at Fannie Mae and Freddie Mac. He also discussed FHA's desired lending niche. The housing chief said government-sponsored enterprises Fannie and Freddie need to do a better job of following their mandates to provide housing and home loans to "low and moderate income Americans." "We're going to facilitate to make sure the GSEs ... carry out their responsibility," Jackson said in an interview with MortgageDaily.com. "They are charged to help low and moderate income Americans. They have not done that very well." But the Federal Home Loan Banks, which are also GSEs, have "done very well" even though they don't have that mandate, Jackson said. He made his comments after speaking in northern Kentucky near Cincinnati to a new group of homeowners who graduated from a homeownership course offered by The Brighton Center, a Newport, Ky., social services agency. During the interview Jackson said despite the proliferation of so-called "exotic" mortgages on the market, the Federal Housing Administration, or FHA, is not likely to offer any of those products. FHA is under HUD's purview. "We're not going to compete with that market," Jackson said. "We're not trying to compete against the mortgage bankers. "What we're trying to do is address those persons who fall through the cracks. And there are millions of them everyday that can qualify for a market rate loan," he said. "But because they don't want to go through all the regulation they go to the subprime market. That's who we are trying to address. We want those persons who are low and moderate income the opportunity to own a home." Making it easier for buyers to apply for loans is the best way for FHA to increase its market share, Jackson said. "That's been our biggest problem," he said. "People don't want to go through all those applications ... to get a loan." That sends buyers to the subprime market, where it is easier yet often costlier to get a loan, Jackson said. "They go to the subprime market thinking they are going to get a good deal because they" fill out less paperwork, he said. "But they end up paying a lot more interest than they should be." The FHA reform bill now working its way through Congress addresses that situation, he said. "We're going to do everything in our power to get that bill out," Jackson said. "We can not continue to let a large group of people go to the subprime market for an 8, 9, 10 and 11 percent interest. When and if we get the bill we can service them at 5 percent and cut down on their notes." Jackson said HUD made some "serious mistakes" about FHA over the last 10 to 15 years. "We almost gave up on FHA," he said. "We're not going to give up on FHA this time. We believe it is a wonderful program. And we can't let people continue to have foreclosures on the subprime market." Jackson said even though HUD is pushing more home ownership it will never abandon public housing. "We are going to be in public housing for the rest of our lives," he said. Jackson, who joined the Bush administration in June of 2001, was asked about the biggest change at the vast agency since he took over. "We haven't had a scandal," he said with a smile. "