Will Subprime Loans be Replaced by FHA Loans

In the past decade FHA Loans have become increasingly unpopular due to being heavily bureaucratic, and subprime loans moving in the opposite direction by becoming much easier to get. In the past year, though, many are turning back to the Federal Housing Administration-insured options for their home loans.

The reason? All across the country low to moderate income home owners are struggling to make their mortgage payments, and the recent news surfacing about the ‘subprime fallout’ has people reconsidering before jumping into no-money-down loans with adjustable interest rates. Plus, most experts are predicting a grim future for the value of homes and for an increase in foreclosure rates in the American home market.

But first, a little update: In recent years, the red tape FHA loans have been known for has been drastically reduced making it much easier to get a loan with the benefit of simpler requirements, lower interest rates, and lower down payments. These changes alone have made a FHA loan a much more viable option for first time home buyers, those with poor credit, or low to moderate income.

There are also numerous Down Payment Assistance Programs that have been organized in recent years. The programs help families who wouldn’t normally be able to pay the required 3% down payment to pay for these as well as other closing costs. These are currently falling under scrutiny, however, and may be in danger of being discontinued.

The United States Congress has had a number of hearings concerning changes to the laws currently governing FHA loans in order to make them more accessible, and the House Financial Services Committee recently approved legislation to expand FHA powers allowing them to refinance more sub prime mortgages. This proposal is headed next to the full floor of the House, where it is expected to pass.

All these changes have positioned FHA loans to take over for sub prime loans as the number one means for potential homebuyers to achieve their dreams of owning a home. If you are considering purchasing a home in the near future, please be sure to see what options are provided for you through the FHA.

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