FHA Home Loans from the Home Loan Magician

The Home Loan Magician offers government financing with FHA home loans that are guaranteed by the Federal Housing Administration. Borrowers with bad credit can breathe easy with FHA lending because they disregard credit scores.

FHA Home Loans provide the Following Benefits: Loan Approvals are not affected by credit scores Borrowers with limited credit can buy a home Interest Rates are Competitive Borrowers do not have to put much down on a home Borrowers with good jobs are rewarded

How to qualify for FHA Loans
The qualification criteria for an FHA mortgage are different than they are for a conforming loan. While your credit score is usually the most important factor lenders consider when approving you for a conventional loan, with an FHA loan it’s not the central consideration. Rather, the FHA evaluates your overall credit history and is typically more forgiving when considering external factors.

Of course it does not mean you can stop paying your bills. The FHA guidelines do require a 1 year period of acceptable credit, during which you have made all your payments promptly. It may review your rental or mortgage payment history during that time, any new credit or credit inquiries, and whether you have paid off any judgments against you. And it considers your debt-to-income ratio to ensure you’ll be able to repay the loan.

Sub-Prime Mortgage Pitfalls in the Private Lending Sector May Help Regenerate
FHA Loan Popularity

Rising problems for lenders and borrowers in the sub-prime finance market may bolster efforts to revitalize the Federal Housing Administration, the New Deal-era agency that helps low and middle-income homebuyers qualify for low-interest mortgages.

In a recent finance article, Kemba Dunham discussed the FHA impact, “backers of an FHA overhaul may have to overcome a perception that the government is taking on too much financial risk -- and bailing out lenders -- by stepping in to help consumers hurt in the subprime market, which offers loans to borrowers with weak credit.”

For decades, the FHA was a major backer of mortgage funding for borrowers with poor credit. But the FHA's share of the market has dropped sharply in the past decade as hordes of aggressive subprime lenders wooed away borrowers with a variety of attractive loan options, including zero down home mortgages and interest only loan payments. The subprime mortgage companies also offered quicker approvals, automated appraisals, less paperwork and reduced hassles, winning over consumers even though sub-prime mortgage rates were in most cases higher than interest rates for FHA-insured mortgages.

"Sub-prime loans were quick and relatively easy for borrowers and that made it appealing," says Guy Cecala, publisher of Inside Mortgage Finance, an industry publication based in Bethesda, Md. "But they came with a lot of strings, things that turned out to be not in the borrower's best interest."

According to Inside Mortgage Finance, subprime mortgage originations, or the dollar volume of such new loans nationwide, totaled $600 billion last year, more than triple the 2002 volume of $185 billion. FHA-backed loan volume fell to $53.7 billion last year, down from $145.1 billion in 2002.

The FHA requires borrowers to put down a minimum down payment of at least 3% and pay mortgage-insurance premiums that could amount to as much as 2% of the mortgage amount. FHA doesn't lend money but rather endorses and guarantees loans.

An FHA endorsement qualifies borrowers to receive a lower mortgage rate from a lender than they would otherwise qualify for, but the process is time-consuming and requires lots of paperwork. The FHA also can't insure mortgages on single-family homes that exceed $362,790, too low for buyers who live in higher-cost cities.

For years, consumer activists and FHA officials have been pushing the government to revitalize and streamline the FHA program to make it an attractive alternative to subprime lenders. Now that foreclosures are surging and more consumers complain of being victimized by subprime lenders, it is likely that modernizing the FHA could move up on Congress' agenda.

Yesterday, a coalition of community groups called on the Bush Administration and Congress to permit the FHA to refinance the loans of defaulting subprime borrowers who are in danger of losing their homes. John Taylor, president of the National Community Reinvestment Coalition, said the federally backed agency wouldn't necessarily buy the defaulted loans, but would act as guarantor or servicer of the loan. The NCRC is an advocacy group that promotes fair-lending practices.

The majority of loans would remain in private hands, but lenders would be more confident they own "a loan that's being paid on instead of one they have to foreclose on," said Mr. Taylor. While some funds will need to be created to support the new role for FHA, he said, "that's more cost effective than allowing this disaster to occur, dragging down neighborhoods."

New York Sen. Hillary Clinton told the NCRC yesterday that FHA mortgage limits should be increased in high-cost areas and outlined a series of proposals aimed at boosting consumer protections. "This market is clearly broken, and if we don't fix it, it could threaten our entire housing market," she said.

The FHA has been trying to revitalize its operation for years. It has tried to update its technology to eliminate some of its unnecessary processes and is hoping to pass a bill to eliminate the minimum 3% down payment and increase the FHA loan amounts, which means that more homes would qualify.

While many experts on housing policy agree that FHA overhaul is necessary, some wonder if too much flexibility would only exacerbate problems. "It would be wrong to suggest that we would not have the present crisis if only the FHA had been there in the first place," says Michael Stegman, director of policy at the MacArthur Foundation in Chicago.