FHA Loans, What is Needed

As promised the plan to bring buyers back into the market.

If you have been following the past few days Blog the real estate and mortgage industry needs a tool to solve a problem that exists today. The problem is that in my estimation about 40% of would be buyers have no access to mortgage loans because of credit and cash down. A basic belief needs to be these buyers deserve the chance to own a home and with proper training and motivation, they will pay on time.

Simply stated, a person who is otherwise qualified in regards to job stability and income but who has credit issues and little or no money to put down and who does not qualify for any legitimate loan program available could enter a FHA program and earn the ability to get an FHA loan. Let’s call it “The Revamped FHA Loan”. Or not, call it something.

The parameters of the program are:

1. 100% loans are available.
2. The buyer would have to pay an elevated mortgage insurance premium based on the fact the lender and FHA is taking more risk. 2 tiers of insurance cost exist, one with and one without a down payment.
3. The elevated cost is fair and the money is refunded in the form of a mortgage principle reduction when the first 24 months payments are made on time.
4. At the end of 24 months the insurance premiums charged are the normal FHA premiums.
5. The buyer must attend 6 counseling sessions provided by a HUD approved counselor over a 6 month period where the buyer learns budgeting, credit basics, credit management, and comes out better prepared to succeed.
6. During the 6 months the buyer may not acquire any more debt or make any late payments on existing debt.

The plan is pretty simple. The buyers come out educated and protected from the predatory lenders and toxic loans with a solid FHA loan in hand.

The politicians will say you should not charge more to those who are already struggling. I say buyers who want the chance to own will jump at this. Let the people decide ignore the politicians.

Some will say these people don’t deserve the chance. I say it is time to give them the chance it is a win win for the economy and society.

Some will fear no matter what this group of people will fail, HUD approved counselors say they will not fail and even as bad as the loans were in the last lending cycle a surprisingly large percentage of people are making their payments on time.

The benefits are obvious; we have more people to buy the homes on the market. More people experience pride of ownership and accomplishment. The economy recovers faster, fewer foreclosures, and the list does not stop there.

“The Revamped FHA Loan”…………What do you think, I know it will work.

More to come

Lonny