FHA Loans: A Loophole Closed

Posted on October 16, 2007
Filed Under Business, Finance, Real Estate |

There once was a loophole in the system regarding FHA loans.  These loans are designed to be government backed, to help qualified, but potentially credit starved individuals get a home loan.  Over the last decade, they offered some of the best mortgage rates to consumers with little credit or with fair credit.  One of the kickers allowable currently was a loophole in which there was no down payment on these FHA loans required to secure them. 

Why does this matter?  As you will see by reading the full article here at BankRate, the fact of the matter is, that many people were able to use FHA loans like this to secure homes that they had not put any down payment into.  No money out of the pocket here, just government backing in case the loan did fall through. 

While these were some of the best mortgages available because they allowed people to avoid the potentially devastating costs and effects associated with subprime markets, it could be costly if these loans were to fall through.

FHA loans are important parts of today’s mortgage industry, and should not be lost because they do provide qualified borrowers with extra assurance of getting the loan they need.  With this loophole closing, though, it may make the housing market even tighter than before.

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