With the economy progressing along a slow recovery, Federal Housing Agency loans have made resurgence in popularity over the past several years. Despite setbacks and failures, FHA loans are still a loan of choice for many homebuyers, especially first time buyers.
The low percentage down is a large part of the decisions of the cash-strapped, but with such notable success, it is important to look deeper.
Three main factors contribute to this rise, especially in California:
1. An extended FHA loan limit in many areas to $729,750, up from $419,000.
2. In California, the market dropped steeply in the bay area and, according to Coldwell Banker Realtor Larry Miller, “the loan limit was going up so high it suddenly made FHA loans relevant in our marketplace.”
3. The third reason for the increase is the pace of the recovery. “The bottom of the market responds first,” said Miller. This recovery at the lower end of the housing market saw an increase in FHA applicable, lower-priced houses selling first.
A recent audit shows that despite the FHA still being below the legal level of cash reserves, the agency will not need taxpayer help, something many were concerned about. Instead, their flagship program has led to one out of five home purchases in the United States and continues to be utilized by homebuyers across the country.
In the past 18 months the FHA were a part of 30 percent of new single-family home purchases and about 20 percent of refinancing deals, according to a Washington post article by Dina ElBoghdady.
These loans have gained back a lot of popularity among first-time home buyers, who can use this program to pay a very low down payment, and can use co-signers if the homebuyers’ income is not sufficient to qualify for the loan.
“The FHA loan is a valuable resource for millions of homebuyers,” said RMR Financial CEO Robert Reid. “Their increase in popularity doesn’t surprise me, especially considering where the market has been.”