There’s no question that the number of FHA loans has skyrocketed since the subprime market fell to its knees late last summer. Actually, up until 5 or 6 months ago FHA loans seemed almost non-existent in comparison to its “100% no-money-down; bad credit, no problem” alternative. Interesting though, considering that FHA has always maintained relatively liberal lending requirements. The main differences between the two types of loans were the strict property condition requirements imposed by FHA and the liberal “stated income, stated assets” programs offered by conventional lenders. Both however provided options for buying a home with little to no money down. And now, the most important difference between the two…one is booming while the other is virtually extinct.
FHA is responding favorably to the market shift, restructuring guidelines and extending loan limits by large margins. The question is will it be enough to make up for the subprime meltdown? Well, while it may not be like David’s sling shot in his fight with Goliath, I’d hate to think how it might be if FHA wasn’t in the picture.
One thing is for sure, buyers are qualifying and they’re closing on homes. I know this first hand as about 70% of the offers I’m now seeing come in on my listings are from buyers presenting FHA contingent offers. Typically these offers require passing a physical inspection by an FHA approved appraiser, in addition to a termite inspection and roof certification. Not quite the ring of fire people have made it out to be. Time will tell, but who knows, maybe FHA will save the day.
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