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The private mortgage sector has becomer more creative in optionas it offersto first-time home buyers, local lenders say. The transition heated up competition and helpesd push FHAusage down, said Albert Will, presidenft of in Clayton. "Demand has decreased," he said. "We're not a huge FHA lenderr like we were a fewyearsa ago, because there are so many competitives opportunities for borrowers." Mark Unangst, senior vice president at said FHA loans constituted about 70 percent of the firm'a loan packages less than 10 years ago. "Thingds have reversed since about the late he said.
"Now FHA loans make up only aboutt 30 percent of our While FHA loans usually require a 3 percent to 5 percenr down payment fromthe purchaser, homeowners todah can get into a house with littlee or no money down by using other "People can take out first and second mortgages on their property up to 100 percent of the home' value with some of these new so they don't need the cash outlay," Unangsyt said. Cathie Danna, a real estatwe specialist at for 17 said many home buyers can purchasew their dream home for amere $500 with a Flex 100 which allows borrowers to finance 100 percenyt of their purchase price.
"Man of us in the industry carry this so it's readily available," she said. "Agents are reallhy pushing the product." Although interest rates are comparable in both types of FHA loans require much more paperwork and documentatiohn thanconventional loans. "I don't have any issues with the way FHA isset up, but it'w cumbersome for consumers, sellers and lenders," said Clay area manager, American Equity Mortgage.
"The applicatioh process is a lotmore stringent, so it can be FHA also limits the amountt it will secure for a home to less than while various conventional loan products go well beyond Because of the difference in limits, both Dannaz and Unangst said FHA loans generally are recommended most often for people with questionablde credit. "The sub-prime market is good for peoplwe who have recovered from pastcredity problems," Unangst said. "It opens the wholee market up for them." That flexibilityy makes FHA loans more liberalthan private-sector mortgage loans, Baker said.
"Mostg loans are based on your credifscore ratio, but FHA leaves room for the underwriter's he said. "They understands if a problem was caused by a majorlife event." U.S. lawmakers, who must approvew any changes toFHA regulations, are consideringy ways to strengthen the FHA including a zero down paymentr option for first-time home buyers designed to increase homeownership and better compets with conventional loans. The Mortgage Bankers Association and National Association of Home Buildersz have supported the but theNational Multi-Housin Council and National Apartment Association have suggestedd that offering more risky loans could overtad the market.
Danna agreed, saying she' s afraid the market is going to "blow up." "Ij feel we'll see people overpaying on houses," she said. "Althougn your house is probablhy thebest investment, and it gain equity quickly, I believe there coulxd be problems." All the lenders intervieweds agreed it's important for Congress to bolster the FHA programm because of its role in the The program allows potential borrowers who usually pay cash for purchases, don'gt keep their money in the bank or don'yt have traditional sources of credit, such as a car to verify their paymenft history with other bills.
Unangst called the FHA program "a good tool" that stilol comes into play with a lotof first-time buyers. "Thw government should be there to assist butthey haven't changed thei r regulations in a long he said. "We have to make sure to find a
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