AgentMortgage

Borrowers eye benefits of FHA home loans

Product offers lower rates, better choices than subprime sector

"What type of borrower finds it advantageous to take an FHA loan?" The answer to this question is a little different today than in 2000 when I first addressed it because FHA's market niche is smaller. This reflects developments in the conventional sector that have not been matched by FHA, including the growth in popularity of loans with no down payment, interest-only monthly payments, and option ARMs. Reflecting these developments, FHA's market share fell from about 15 percent in 2000 to about 5 percent in 2006. The FHA Market Niche in 2006. An FHA borrower: Has blemished credit acceptable to FHA, but not strong enough for prime pricing in the conventional market. Doesn't need a loan larger than the FHA maximum, which varies by county. (In 2006, it ranged from $200,160 to $362,790 in the highest-cost counties.) Can put 3 percent down in cash. Doesn't want an interest-only mortgage or an option ARM. Credit Requirements: At risk of oversimplifying, credit standards in the conve...