In a Bind? Look at FHA to Refinance or Purchase

I can remember a time in the not too distance past when FHA was the ugly sister to the slick conventional mortgage products.

It made sense too. FHA is a fully documented loan and there are no corners cut when processing these loans.

A good example was the inside and out appraisal required by FHA. Why would a lender want to chance that when they could avoid it with a conventional mortgage?

FHA catered to first time home buyers with little down payment and somewhat sketchy credit, like many young people.

First timers could get, with FHA, a highly competitive interest rate loan. It even had lower down payment requirements than the conventional loan.

Over time, with easing of lender restrictions, FHA went by the wayside. Even the 100% conventional products were better than going FHA… At least from the borrower’s perspective.

I imagine the mortgage companies would like a redo at this point.

Well, the rest as they say, is history. The ramifications will be felt for the next decade. Currently conventional zero down financing is gone, sub-prime is history, and sub-A products are on the rocks.

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.

And credit is based on payment history rather than scoring.

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.

The economy of the last two years has affected many people’s credit.

The truth is these loans have always been a great option. Now that conventional mortgages are far more conservative Fha is a great option.

FHA mortgages, though a former ugly duckling, will be savior to many in the coming years.