FHA Switcheroo

by Peter G. Miller
May 30th, 2007

It appears that a lot of people are getting tired of new-fangled mortgages with strange terms and surprising costs.

The result? They’re turning to FHA loans.

FHA Commission Brian Montgomery says about 100,000 people will dump “nontraditional” loans and convert to FHA financing.

Is this a big deal? You bet.

First, FHA loans have tougher terms than a lot of recent mortgages – you have to document your income. No “stated income” loan applications allowed.

Second, you have to have equity or cash in the deal equal to at least 3 percent of the property.

Third, 100,000 mortgages is about a fifth of the FHA loans issued in 2006 (okay, “fiscal” 2006 — that’s government-speak for the accounting year which starts October 1st).

Here’s a tip: If foreclosure rates keep going up and up, a lot more people will be switching to FHA mortgages.

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