FHA Low Down-Payments, Low FHA Mortgage Rates Fueling Housing Market
By: Ed Ferrara
LOS ANGELES, CA — Feb. 14. (FreeRateUpdate.com) – There has been talk, amid rising delinquency rates approaching 10% on FHA insured mortgages, that FHA will increase required down payments to 10, 20, even 30% for those purchasing homes with FHA loans. Despite the fact FHA delinquencies are at a all time high, this talk of a significant increase in FHA down payment requirements is unfounded. FHA has always been offering down payments 
of as little as 3%, even before the sub prime boom, FHA was there, with low down payment mortgages. It’s how many of our parents, maybe even how you bought your home in the 70′s, 80′s or 90′s. A combination of most importantly low down payments, but also low FHA mortgage rates has been undoubtedly been what is fueling the house market today.
Though banks like Wells Fargo advertise an FHA 30 year fixed, at a rather high 5.5% with an APR of 6.245%, FHA mortgage rates have been just as good as conforming mortgage rates for months. Many banks, like the ones on our local mortgage rate search, offer FHA 30 year fixed rates as low as 4.75%. It’s a given with recently raised insurance premiums, closing costs on an FHA loan far exceed that of a conforming mortgage, but the government tax credit of up to $8,000 available until April can pay a majority if not all the closing fees on your FHA loan.
There’s no doubt it’s FHA loans, with low down payments and low mortgage rates, that have carried the housing market through these trying times. In today’s market, there are very few people that have and or are willing to part with the 20% down payment cash. They key word is cash. Cash rules and it’s unlikely no matter what “steal” is available that a consumer will part with $20,000, $40,000, $60,000, or more to buy a home with financing requiring 20 to 30% down. Until the housing market is at least at a normal sales volume, down payments aren’t chancing on FHA loans.
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