The Federal Housing Authority (FHA) insures against losses to lenders who originate FHA qualifying loans.  FHA is not a lender, but rather a government sponsored insurance program designed to promote a sense of stability in a housing market that currently demonstrates anything but stability.  Conditions similar to today’s housing market existed in 1934 during the depths of the depression.  FHA was created in 1934 to stimulate the U.S. economy and housing market at that time.

“The housing market today is worse than in 1982 and the mortgage industry keeps taking more hits.  FHA is the only positive aspect of residential lending” says Marcus Savage, a Financial Strategist and faculty member of The National Institute of Financial Education.  “The recently signed $300 billion stimulus package approved by Congress and signed by the President will provide an immediate impact on the financial lives of many individuals.”

FHA backed loans began to lose their luster in the late 1990’s when home values began to rise rapidly and mortgage amounts surpassed FHA limits. Sellers also balked at FHA’s stringent appraisal guidelines.  With everyone looking to FHA to rescue the housing market again, FHA has drastically increased loan amount limits to accommodate today’s housing markets.  “Previously capped at $362,000, FHA has increased maximum loan amounts to $417,000 or 125% of the medium price for the area, with a maximum of $729,750” says Marcus Savage.  “Additionally, the new legislation allows us to refinance a borrower’s mortgage to 95% of the current value regardless if they owe more than what the house is worth.  The current lender is forced to write off the difference as a loss.  The government is really trying to solve this housing crisis and financially help borrowers if possible.”

Key benefits of FHA backed financing:

• FHA does not have risked based pricing. Credit scores down to 580 are acceptable.
• FHA allows for lenient debt-to-income ratios.
• FHA allows for co-signers that aren’t going to live in the property.
• FHA allows a minimum of 3% down payment.  Entire down payment can be a gift.
• FHA has no reserve requirements.  You don’t have to have a certain amount of assets.
• FHA has no restrictions against first time home buyers.
• FHA allows for non-traditional or alternative credit ratings; utility ratings, etc.
• FHA will allow the seller to contribute 6% of purchase price toward closing costs.
• FHA backed loans have no prepayment penalty.
• FHA has authority to force lenders to accept a payoff less than the current balance for a qualified FHA customer.
• FHA backed loans are assumable by a qualified buyer.
• FHA offers an automatic streamline refinance feature.

Key essentials in qualifying for FHA backed financing:

• Steady employment history.
• Consistent or increasing income over the past two years. 
• All income must be documented.
• Bankruptcies must be at least two years old with re-established credit.
• Foreclosures must be at least three years old with re-established credit.
• You should work with a professional that specializes in FHA guidelines.

As a faculty member of The National Institute of Financial Education and co-author of his book “Borrow Smart Retire Rich,” Marcus Savage teaches borrowers the power of managing liabilities effectively.  “Since a mortgage is going to be the largest liability most of us incur, it is imperative to work with an FHA specialist as we all continue to cope with the financial crisis that has engulfed our country.  We feel blessed to be able to help so many with our knowledge.”

Marcus Savage

Financial Strategist – CLA, CMPS, CMA

National Institute of Financial Education

Toll Free: 800.979.4550

Marcus@TimeToBorrowSmart.com

www.TimeToBorrowSmart.com