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FHA loans vs Standard 30 YR w/20% down
invite response
2009 Jul 13, 11:53am 36,788 views 101 comments
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101
Austinhousingbubble
2009 Jul 29, 2:11pm
Here's some interesting news from the AP...
http://www.google.com/hostednews/ap/article/ALeqM5jYs8k4cz398yrVYLt3QxLvIURD9wD99OF1M02
"...the FHA became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market."
"The FHA currently backs a 1/3 of new home loans, up from about 3% in 2006"
"Cutting out 25% of available mortgages would be a disaster, decimating the market and hurting millions of prospective homeowners."
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So, every time I turn around, a friend or acquaintance of mine I know is signing a contract on a house, with price tags between 360K to 470K. Never mind how myopic it is to even be shopping for a house at this particular time, my assumption was that they all had 20% to put down; that they've lived beneath their means and diligently saved, as I have over the years, skipping out on finer dining, high-end organic leafy greens, exorbitant import car payments and world travel - or just inherited well. However, when pressed, it seems that they're ALL using FHA loans, with 3% down.
So, the question is - what gives? Is this not the folly it seems to be? Does it not make sense to wait for the market to cool back down to normal, have potentially lower property taxes, have more equity in your place, and have a lower overall monthly payment--all the benefits that go with the 20% down route...? Or am I missing something?