In a Bind? Look at FHA to Refinance or Purchase
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.
I mean heck, FHA required the appraiser to actually go in the home. What? Forget that, “I wanna drive-by. Or better yet, no appraisal at all.” I say that as I steeple my fingers.
The perception of the government insured mortgage was one of for first timers with poor credit and little down payment.
The benefit of the program was interest rates were roughly the same as the conventional products.
This financial mess we’re in started in the ’90s. I can remember lenders relaxing conventional underwriting requirements. It go to the point when the lowest down or zero down conventional loan was the way to go.
If the lenders could only take the last 10 years back…. I think they might.
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.
So, why go FHA. Well, to begin you don’t need a big down payment. Many people don’t have that now. The typical FHA mortgage requires 3% down payment.
And credit is based on payment history rather than scoring.
The light credit requirements are of great help to those with lack of credit or others who hit a rough spot and are in the credit rebuilding process.
A ton of folks have had their credit scores pummeled over the last 24 months.
What I’m getting at here is the government loan is a make sense option when conventional loans are hiding under a proverbial rock.
The government loans keep chugging along and offer a great benefit.
