After a very long fight, down payment assistance on FHA Loans will be eliminated October 1. Although these programs were banned nearly a year ago, the agencies that provide them had fought to keep them around. That officially came to an end with the passage of the Housing and Economic Recovery Act in July. Down payment assistance, which was basically a glorified loophole, was the process where the seller gave the down payment amount to a not-for-profit organization, who would then give that money to a buyer to use for his or her down payment. This would usually result in the seller tacking that amount onto the price of the house, resulting in higher payments for the buyer, and a greater likelihood of default. These intermediary organizations came into existence because the FHA forbids sellers from directly paying a buyer’s down payment. The trouble really began for the DPA organizations back in 2006 when the IRS referred to a few of them as – and this is a direct quote – “scams.”

Now, I understand that there are concerns that this will hurt home ownership rates, but I think just a glance at the sub-prime mortgage mess is enough to realize that a down payment is a critical component of responsible home ownership.

There are certain programs, such as the VA Home Loan Program, that were designed to not have a down payment and have succeeded because the program was structured around that fact. FHA Loans were not. Home ownership must be earned. In the case of VA Loans, it is earned through service to our country. When it comes to FHA Loans, it is earned through saving up a down payment sum that remains lower than those of conventional mortgage products.

Please see my Updated Post for new details.

While the effects of the sub-prime mortgage market mess continue to wreak SERIOUS havoc, FHA Loans continue their positive growth. According to the Baltimore Sun:

Home buyers and refinancing owners nationwide took out nearly 530,000 FHA loans in the first half of the year, 160 percent more than in the corresponding months last year. In the Baltimore metro area, FHA loans skyrocketed from fewer than 2,500 to more than 9,300 – a nearly fourfold increase. Agency officials believe the recent federal takeover of mortgage financiers Fannie Mae and Freddie Mac will only add to its numbers.

The article also points out that FHA Loans aren’t being considered just by first time home buyers anymore. In today’s market, an FHA Loan can be a realistic offer for buyers at many different stages of life.

FHA, or the Federal Housing Administration, is a backbone to our lending industry in the United States. What FHA does is provide lenders with reassurance that the loans they provide as FHA backed loans are safer than those without this backing. Borrowers of FHA programs come from a wide selection of people; including those with less than stellar credit, those looking for the lowest interest rate possible, and people looking for backing from the rocky market. The good news is that FHA loans can be refinanced.

Of Particular Importance

As a homeowner currently, you may be looking for help in getting out of a bad mortgage. It could be that you have had a rate adjustment, or you could be facing other circumstances in which you simply can’t afford the loan you currently have on your home. It is happening to millions in the country right now. FHA is there to help.

FHA will provide refinancing into better loans to qualified buyers. You don’t have to have the highest credit score to get this help, either. FHA is allowing borrowers who do not have a strong credit history but are attempting to make their mortgage payments, help in getting into new loans. You may be approaching your limit and risking default, or you may already be in default. If this is the situation, look into FHA loan refinancing options for you. Many people will qualify for these loans and that means getting to stay in your home long term.

Of particular interest to those struggling with their loans is the FHA’s program: FHA Secure. If you are planning to sell your current home because you are on the verge of facing foreclosure, this is a potential option for you to stay in your home, too.

Who Qualifies For Help?

There are many people that will qualify for FHA Secure, but it is best for those who:

• Have been “good” borrowers in the past
• Have had their mortgage adjust and because of that adjustment are now facing problems making monthly payments
• Are on the verge or actually in foreclosure
• Had good credit but their current situation has ruined their ability to refinance their loan elsewhere through other loans
• Have a maximum home value or mortgage value of $417,000
• Need immediate help, all proceedings from FHA Secure need to be initiated and closed before the end of the year (unless renewed)

Do You Need Help?

Those who are struggling with their current mortgage will want to seek out help through FHA Secure. Even if you do not meet the qualifications for this program, FHA offers various opportunities for help. FHA loan refinancing is an option even if you currently do not have a FHA backed loan. Federally Insured Loans are designed to provide you with the ability to get a lower interest rate. They also help people who otherwise may not qualify for their loan.

If you are considering buying a home, you will not need FHA refinancing, but you may still want to qualify for an FHA loan for your new purchase. Talk with a specialist about the options available to you. These loans are available to a variety of people in a number of different credit scenarios.

As with any loan, you will need to show proof that you can afford the loan. If you are unable to make payments due to lack of employment, you may not qualify for an FHA loan, or any loan. Many people will qualify for this program, even those who do not have great credit.

Find the help you need for FHA loans through FHA Secure or other FHA loan programs currently available.

President Bush has been a long standing opposing figure against the housing bill that’s currently working its way through Congress. His reasoning here is sound: there are too many piggyback conditions being added to the bill, which is often the case with any legislation today. Yet, today, he announced that he would no longer fight this bill’s passage. In other words, he has put the VETO stamp down, at least for now.

The housing bill has merit: give homeowners who are struggling to keep up with their mortgages the ability to find new loans, with lower interest rates and payments, so they can get back on their feet. These new loans would come from federal programs. The housing bill would also provide support to the struggling mortgage giants Freddie Mac and Fannie Mae. These organizations are in dire need of additional funding and a cash infusion.

President Bush’s problem with the housing bill is noteworthy. There is an estimated $3.9 billion worth of provisions that would be aimed at providing lenders with additional financial support (that is not homeowners, but lenders) which Bush did not agree with.

In a telephone conference call with reporters today, the White House’s Press Secretary Dana Perino made this statement, as quoted by the Associated Press. “We believe this is not the time for a prolonged veto fight but we are confident the President would prevail in one.” Then, added, “The positive aspects of the bill are needed now to increase confidence and stability in the housing and financial markets. While we have concerns with other aspects of the bill, it is important that the new authorities are put in place promptly. And so President Bush will accept Secretary Paulson’s recommendations to sign the bill.”

So, what does this mean to those who are struggling with the current foreclosure market? If and when the bill passes through Congress and President Bush signs it into effect, it could mean additional protections and more loans available to keep homeowners out of the financial stresses they are currently in. The housing bill is designed to pump more opportunities into the system.

For those who are currently struggling with home loan, it also is important to get help as soon as possible. Do not wait for this bill to go into effect. Instead, seek out the help of an FHA loan specialist to offer you solutions. FHA loans are also readily available to those who need a new home loan.

Homeowners who are struggling to make payments in New Jersey may have an opportunity to get out of their bad mortgages easier than they think. As a proponent for helping those who are struggling with home loans, I must first say that if you are on the brink, contact an FHA loan adviser to find out what your options are. If you are in New Jersey, consider this opportunity.

The Federal Home Loan Bank of New York is a large bank providing funds to many of the 200 local banks in the region, including those in New Jersey. The bank has recently announced an initiative to offer some help to those who are struggling with their current mortgages.

The initiative is called HARP, or Housing Assistance and Recovery Program. The Federal Home Loan Bank is providing some $6 millions to Magyar Bank, which is based in New Brunswick. There, the First Baptist Church of Lincoln Gardens will provide counseling to those homeowners it has identified as being in danger of foreclosure. Once these people have been identified, the company (working under The First Baptist Community Development Corporation) negotiates on the homeowner’s behalf with their lender.

They use the proceeds from the $6 million loan to offer up to 70 percent of the loan’s value to the lender. Most lenders are happily taking 70 percent knowing that these individuals are on the verge of foreclosing. The lender will simply write off the remaining 30 percent as a loss and turn the loan over as a paid in full loan (which Magyar Bank will now hold as mortgage holder.)

Sound confusing? It is, but there is more. Magyar Bank holds the loan, but the homeowners are now actually renters in the home, and will make payments to First Baptist. The rent amount is based on what the homeowner can afford to pay. First Baptists works closely with these now tenants so they can improve their credit scores and their financial outlook. Then, once the tenants are ready, they will hopefully be able to refinance the loan into a new one with better terms.

The organization is working with other organizations in the New York area, as well as other areas of New Jersey to offer similar opportunities. There are several families making the transition into new mortgages currently.

Is this the right option for you? If a program like this is offered, and you have exhausted all possibilities with other loans, including FHA loans, then consider it. Work hard to get back ownership of your home though!

Do not make this mistake: Don’t hire someone to help you foreclose on your home or get a short sale for your home. You are wasting your money.

Next, don’t make this mistake: Don’t allow your home to go to short sale or to foreclosure without first contacting an FHA loan representative to find out if there is any help available to you. Most home loan borrowers will find some options to help them avoid losing their home to either of these financially devastating situations.

What happens when you go through a short sale or a foreclosure? What you may not realize is that both have the same end: you will lose your home and you will have long-term damage to your credit record. There is some evidence that both are just as hurtful to your credit, even though many will try to “sell” you on the idea that home foreclosures are worse on your credit than short sales.

What you do not need is to buy information or advice from a third party, especially when you are already having a difficult time with finding money to pay your lender.

Remember This!

If you do go through a foreclosure or you do have a short sale, one thing is for sure: you will be unable to get a new home loan for at least three years that is insured by FHA. Though there are some exceptions, they are few and only in dire situations. The fact is, if you do go this route, you won’t be able to get FHA insured loans later and that will hurt. More so, any time in the future that you apply for a mortgage, even well after those three years, you will need to state that you lost a home to foreclosure or to a short sale.

According to some experts, the only difference in the two in the long term is that in a short sale, you were involved in the process, or “at the table” for what happened. Whereas in a foreclosure, most home owners have little to do with the legal proceedings.

But, I’m Going To Lose My Home!

Those of you who are in rough water right now, hang tight. Contact an FHA loan advisor to find out if there are any current programs in place to help you through this difficult time. Most home owners are able to get the financial help they need. Many will find FHA loan options to keep them in their homes and to avoid all of these costly situations. You do not need to pay someone to short sell your home for you!

It used to be that once you graduated college, you were sent out into the world to make something of yourself…including getting into your first home. A home loan is not what is on the minds of a new group of people at this point, though. In fact, many people are looking to go back home to their parents house.

In a traditional sense, leaving college means starting a new job, getting into your first home loan and maybe even getting serious about someone. Yet, many college graduates are leaving this on the side and simply going back to what life was like the first 18 years of their life. Is this is a good option for many?

When You Have No Other Choice

Many people are pursuing this avenue because they feel they do not have any other choice. They may not qualify to buy their first home, for example. If this is the way you feel, definitely think again. You may be putting yourself on the road to mistakes and here is why:

• FHA loans make qualifying for a home loan easier to do, which has allowed many college graduates with little credit experience to get into a home even as a first time employee.
• FHA loans also are helping to make loans more affordable. For those graduates who are struggling to grapple with high interest rates, they won’t have to because of the more affordable home loans available through FHA security.
• You could be costing yourself more money if you wait; in the long term (even just a few years down the road) it is likely that the interest rates on home loans will rise. These historically low interest rates currently make buying a home an opportunity.

Going Home To Save

In addition to going home because college students don’t believe they can afford a home loan, many are also going home to save up for big down payments on that first home. This is a good thing, of course, but only when you can actually afford to do so. Remember, interest rates right now are still very low, which means it is still a very valuable time to invest in a home. Waiting until you have a sizable down payment may mean it is too expensive to buy a home later.

Traditionally FHA loans do not require that you have a large down payment either. You will be able to invest in a home with less of a down payment than most standard loans offer. Conventional loans are becoming a bit more difficult to obtain as many lenders are worried about losing money (so many of them have lost substantially due to the number of foreclosures they’ve had to pay for.) Therefore, when you do go out to get a home loan, be sure that you are securing a home loan that’s FHA backed.

When It Is Time

Once it is time to start looking for that great investment in a home, here are some tips to help you do it correctly:

• FHA loans offer added security to a lender; having an FHA loan will get you into a home loan with a lower rate and it may help some with less than perfect credit (but with other qualifications such as income) to get the home they want.
• Test drive your mortgage; start paying a mortgage payment each month to your savings account before you get into a real mortgage. This gives you a real idea of what it will be like to have a mortgage payment.

Make wise financial decisions for yourself, even if you do spend the first few years back at home saving for a home loan. Look at it from all directions. Do not forget to consider the benefits of an FHA loan, too.

There are outstanding opportunities for investment in the home loan field, even if all the news coverage lets you believe there are none. The current mortgage market is getting the squeeze but that is not to say there are not opportunities or that everyone will be effected. Soon to be home owners, or those hoping to be home owners will find options to select from in home loans.

Credit….It Matters

Those looking for an opportunity to find a home loan to buy their dream home, starter home or any home in between, need to realize that credit scores make a large difference. Many lenders are shying away from lending to those who have low credit scores or have had difficulties in the past. With so many filing foreclosure, it’s understandable that these loans are harder to get…but all is not lost.

Even if you do have some problems, there are solutions available to you. One of the best solutions for borrowers with less than stellar credit is to consider FHA loans. FHA is a government department that provides an added level of security to lenders. While they will not help you specifically, they will provide lenders with some security to lend to you. Indirectly, it does help the homeowner though. With FHA insuring your mortgage, lenders look more favorably on your application. They have less risk investing in you with FHA behind you. Therefore, even for those who have a lower credit score, interest rates may be less.

Good Credit Helps

Home buyers with good credit will find opportunities available to them. In some situations, shopping around from lender to lender may give you an advantage at this point. Now, there are less qualified applicants to choose from, so lenders are going above and beyond normal offers to attract good borrowers. It is estimated that as many as 1/3 of applicants who qualified for loans in 2005 and 2006 no longer have the ability to qualify for the same loans today. This takes into account the loss of subprime loans and alternative loans that are no longer being offered as lenders tighten their belts.

Step To Getting The Best Loan

You want to buy a home. You want the most affordable home loan with the largest amount available to you, that fits within your budget. Here are some tips and steps to help you find that ideal home loan.

• Do not overlook the benefits of FHA loans. I cannot stress enough that for anyone borrowing; this is the best route to take.
• Improve your credit as much as possible…or at least do not make it worse. It will make a big difference down the road.
• Compare lenders, not all will offer you the same interest rate no matter what your credit score is. Most lenders will offer FHA loans though.
• Secure a down payment if possible to lower your interest rate and to look more favorable to the home loan lenders.
• Have stable income, and a good employment history. Do not expect to get a loan that offers a large line of credit if you cannot show proof you can actually make the payments.
• FHA administrators are encouraging (and I do too) that you look for a fixed rate loan. FHA loans offer fixed rates and the ability to refinance down the road if you decide to.

Getting a home loan is not easy right now, by any means. Most experts do not believe the mortgage industry is going to get any more flexible until the number of foreclosures slows down. This could take another year or longer to see results in. Yet, you do not have to wait too long to see a home loan. The fact is, with the help of FHA and other loan programs; you can get a good loan at an affordable interest rate.

Any potential home buyer should be concerned with the current housing market. More importantly, they should be concerned with the types of loans available to them. As a first time home buyer (or even those who have been around the block- quite literally) should realize, getting into a low rate mortgage loan offering a fixed rate should be the optimum option. I highly recommend your first contact is through an FHA loan professional. FHA, or the Federal Housing Association, provides fantastic opportunities for individuals looking for affordable loans.

However, should you invest now?

Chances are good you have heard all the worries on the national news programs:

• Credit harder to get
• The housing market continues to fall
• Home values are falling
• There is a lot of risk

Nevertheless, you may not realize that on a more local level, this is not the case. You see, when nationally televised programs are offering stats on how the housing market is doing, they are only seeing the big picture. The facts are that the local picture is much clearer and still offers fantastic opportunities for home buyer. In fact, there is an abundance of homes on the market, many of which are well priced and fully featured; meaning now you will pay less for the home of your dreams than you would have three to five years ago.

Look at a local situation closely. For example, the Port Orchard Independent, a Washington publication, offered a better look of what the housing market is really offering in their neck of the woods. There, for example, there are some excellent opportunities.

• Interest rates on mortgages are at historically low points now, making it more affordable to buy a home at this point
• Washington state banks, consumer loan companies, mortgage brokers and even local credit unions have the funds available to loan to those who have average or better credit scores.
• A variety of FHA programs are now available for those looking for a low cost way to get into a home.
• More variety in loan programs including expanded FHA guidelines make it a better time for the home buyer to get the type of home they want.
• There is a large selection of quality homes, as well as new homes on the market in most areas.
• In Washington, in particular, home values are steady, not plummeting as most news reports show.
• In fact, Washington’s economy is outperforming that of other states and the national economy as a whole

It’s Not Just Washington

While these are some facts about Washington State’s current situation, the fact is, many states are seeing the same evidence. Before you hold back on buying a home because you are worried about the national level of housing market success, look at the local point of view. You may find that the local market is an ideal opportunity for investment.

Make A Personal Decision

It is also important to make a personal decision about investing in a home now. Are you at the right place in your life to make a good investment happen?

Take a look at your current credit score and boost it anyway you can, such as paying down debt and by making payments on time. Also, be sure to pull a credit report to remove any mistakes that could be there. Improve your credit for as long as you can.

In addition to this, realize that the best programs available to you currently are likely FHA backed loans, because they provide lenders with more security and are more likely to be funded at a lower interest rate.

FHA loans are one of the most talked about today…that was until Freddie Mac and Fannie Mae started getting all of the attention. Recent share prices as evidence, the two mortgage giants are struggling and in desperate need not only of additional capital, but also more management. Freddie Mac and Fannie Mae are the nation’s top lenders, who are government-backed providers of funds for backing mortgages. Without them, the nation’s mortgage industry would wobble even worse.

The problem with these providers is that they have not had much guidance or any amount of regulation. There is new legislation working its way through Congress that will provide some relief. James B. Lockhart III has been heading this agency for some time, and throughout that, time has been calling for help. The problem, as he has said is that the two agencies are not required to hold a lot of capital, as compared to larger banks. That’s about to change…or it may that is.

The legislation provides several changes to the Federal Housing Finance Agency, which will now regulate Freddie Mac, Fannie Mae and the Federal Home Loan Banks. First, a regulator will be put in place that has the ability to raise the capital requirements. The regulator also has the ability to hold back executive pay at these companies. If the companies should become insolvent, the housing bill offers specific procedures to place the companies into receivership status. Also important is the drop in the highest level of mortgage backing that Fannie Mae and Freddie Mac can loan or guarantee to $625, 500, which is down from $729,750, which is the temporary ceiling that was put in place.

In addition to this, the legislation also offers a provision for a portion of the profits to be put into a trust fund, which is then designed to provide financing for those who qualify as low income people.

What does this mean to you, the average homeowner? Currently, it doesn’t mean a whole lot, not until it goes through Congress and gets put on the books. It should mean that more regulations would be in place to prevent the collapse of these important lending bodies in the nation.

However, for now, it is up to you to find the best loan for you, which Freddie Mac and Fannie Mae may be. FHA loans are an opportunity to get into a home loan without a lot of risk, too.