Tri-Cities Real Estate News & Views

There's never been a better time to get an FHA home loan.

These high-benefit loans are making a comeback during the lingering recession. Thousands of prospective homeowners are turning to FHA loans to achieve their dream of home ownership.

In fact, the FHA set a monthly record in June, guaranteeing almost 186,000 mortgages. The agency has insured more than 34 million properties since its inception in 1934.

"A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," Orawin Velz, associate vice president of economic forecasting for the Mortgage Bankers Association, said in a news release. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance."

FHA loans continue to resonate with low- to middle-income buyers and first-time buyers, although there are no income restrictions to obtain these government-backed loans. Scores of first-time homebuyers are utilizing the new $8,000 first-time homebuyer's tax credit in conjunction with FHA loans to maximize their financial flexibility.

But FHA loans offer an array of benefits to prospective buyers across the spectrum. These loans continue to make sound financial sense in the face of a hardened credit market and a slumping national economy. Some of the many benefits of FHA loans include:

• No credit score requirements. Buyers can obtain FHA loans without sterling credit. Some who cannot obtain a conventional loan will qualify for an FHA loan. Even people who have experienced bankruptcy or foreclosure can obtain FHA loans.
• Low out-of-pocket costs. FHA loans require only a 3.5 percent down payment. There are even special loans that when combined with an FHA loan eliminate the need for down payment. Closing costs are also typically lower for FHA loans. First-time buyers can utilize the $8,000 tax credit to cover down payment or closing costs, too.
• Home types. Prospective homeowners can purchase single-family homes, up to four unit buildings as long as they live in one of them, and condominiums. Buyers can also use special FHA loans to purchase and rehabilitate fixer-upper properties.
• Loan Amount. The FHA has loan limits depending on where the home is located. Currently, the loan limits range from $271,050 to a maximum of $729,750 in high-cost areas such as California, New York and New Jersey. Buyers who can purchase a home without exceeding an FHA loan limit receive the most benefit.
• Premiums and rates. Borrowers are on the hook for an upfront insurance premium, but this cost can be financed into the loan directly. Interest rates for FHA loans experience small adjustments, if any. Rates typically vary within .125 percent of a conventional loan.

This guest post was written by Brandon Laughirdge of Mortgage Loan Place. MLP specializes in educating consumers about government loan programs with an emphasis on FHA Mortgages and FHA Loans.