(NAPS) A growing number of homebuyers are showing renewed interest in a type of mortgage that, some say, has been overlooked in recent years.
For many homebuyers and real estate agents, the Federal Housing Administration (FHA) loan has started to reclaim its status as an affordable loan. Plus, it now comes with less red tape and more buyer-friendly features than in the past.
It s important to note that FHA does not make loans. Rather, it insures loans made by private lenders.
Some say this type of loan along with companion Department of Veterans Affairs (VA) loans deserve to be back on consumer and Realtor radar screens. And for good reason, said Allen Jones, government lending executive for Bank of America.
According to Jones, These loans are safe, sound, easier to use and more buyer- and refinance-friendly than ever. He also noted that Bank of America is one of the largest government loan providers in the U.S., particularly for first-time buyers who might not otherwise be able to afford substantial down payments.
Federal Housing Administration loans require a lower down payment about 6 percent than other types of loans. However, until recently, some buyers and real estate agents avoided loans such as these. That s because the loans had what many considered rigid appraisal requirements, inflexible closing terms with sellers, and bureaucratic steps that some found confusing.
Fortunately, those pitfalls have recently been amended by administrative changes. As a result, these loans have emerged as the loan of choice for many consumers. Also on the upside: There are no prepayment penalties and the loans are assumable features considered desirable by many buyers. The loans have retained requirements for full documentation to support the borrower s ability to repay the loan.
Said Jones, At this point, FHA is considered by many to be the best source of prime rate and low-down-payment financing for many first-time homebuyers and borrowers with any credit issues. And there s icing on the cake: Higher loan limits open the loans to even more borrowers.
Because these loans are prime, they tend to be viewed positively by both the lender and real estate communities alike.