It wasn’t all too long back when you couldn’t find a mortgage broker or banker wanted to do a FHA insured mortgage. It was Conventional or bust.
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.
The perception of the government insured mortgage was one of for first timers with poor credit and little down payment.
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.
If I was a betting man I’d say lenders wouldn’t mind a do over right about now.
The financial disaster resulting from the greed on Wall street to poor leadership at the mortgage servicing companies will be felt far and wide for the next ten years. Conventional products are extremely limited now.
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.
From a credit perspective FHA looks more closely at on time payments rather than credit scores.
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.
Some have taken a good beating in the last year you know.
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.
The government loans keep chugging along and offer a great benefit.
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