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The private mortgage sector has become more creative in options it offereto first-time home buyers, local lenderd say. The transition heated up competition and helped push FHAusage down, said Alberr Will, president of in Clayton. "Demandd has decreased," he said. "We're not a huge FHA lender like we were a fewyearss ago, because there are so many competitive opportunities for Mark Unangst, senior vice president at Gershman, said FHA loans constitute d about 70 percent of the firm's loan packages less than 10 yearw ago. "Things have reversed since aboutr thelate '90s," he said. "Noew FHA loans make up only abouft 30 percent ofour business.
" While FHA loans usuallty require a 3 percent to 5 percent down payment from the homeowners today can get into a house with littlse or no money down by using othet programs. "People can take out firsf and second mortgages on their property up to 100 percent ofthe home's valu with some of these new so they don't need the cash Unangst said. Cathie Danna, a real estatee specialist at for17 years, said many home buyers can purchase their dream home for a mere $500 with a Flex 100 which allows borrowers to finance 100 percent of theidr purchase price. "Many of us in the industru carrythis product, so it's readily available," she said.
"Agents are reall y pushing the product." Althougyh interest rates are comparable in both types of FHA loans require much more paperwork and documentation thanconventionapl loans. "I don't have any issues with the way FHA isset up, but it'es cumbersome for consumers, sellers and said Clay Baker, area manager, America Equity Mortgage. "The application process is a lotmore stringent, so it can be FHA also limits the amount it will securw for a home to less than while various conventional loan products go well beyond that. Because of the difference in both Danna and Unangst said FHA loand generally are recommended most often for peopl e withquestionable credit.
"The sub-prime market is good for peoplwe who have recovered from pastcredig problems," Unangst said. "It opens the whole market up for That flexibility makes FHA loanzs more liberalthan private-sector mortgagwe loans, Baker said. "Most loans are basec on your creditscore ratio, but FHA leavesw room for the underwriter'sa interpretation," he said. "They understand if a problemm was caused by a majorlife event." U.S. who must approve any changes toFHA regulations, are considerinh ways to strengthen the FHA including a zero down paymen option for first-time home buyers designed to increaser homeownership and better compete with conventionalo loans.
The Mortgage Bankerw Association and National Association of Home Builders have supportedcthe idea, but the National Multi-Housingf Council and National Apartment Association have suggestexd that offering more risky loans could overtaxz the market. Danna agreed, sayintg she's afraid the market is goingf to "blow up." "I feel we'llo see people overpaying on houses," she "Although your house is probably thebest investment, and it gainsw equity quickly, I believe there could be All the lenders interviewed agreed it' s important for Congress to bolster the FHA program becausde of its role in the The program allows potential borrowers who usually pay cash for don't keep their money in the bank or don'f have traditional sources of credit, such as a car loan, to verifyt their payment history with other bills.
Unangsft called the FHA programj "a good tool" that stillo comes into play with a lotof first-time buyers. "The government should be there to assist butthey haven't changed their regulations in a long he said. "We have to make sure to find a balance."
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