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Mortgage Loans: Flat Home Prices Promoting Affordability

[Feb 27, 2010.]


The National Association of Realtors (NAR) reports that existing home sales fell by 7.2% in January 2010; this is the second largest decline since December 2009, when sales of previously owned homes fell by about 16%. Severe winter weather, unemployment, and the traditional winter lull in home sales have likely contributed to these declines. Lower home prices and reasonable mortgage rates continue to offer buyers good opportunities for finding affordable homes and mortgage loans.

Mortgage Loans: Want to Buy, but Low on Funds?

Coming up with a down payment and closing costs can be an obstacle to buying your first home. If you're otherwise prepared to buy, you may qualify for down payment assistance through state and local home buyer programs sponsored by state housing finance agencies and community home buying programs. Real estate professionals and mortgage lenders can direct you to applicable programs in your area. These programs are designed to help first-time buyers but typically define first-time buyers as anyone who has not owned a home within the past three years. Features of these programs vary; please contact local program sponsors to learn more about down payment assistance and eligibility criteria.

FHA Loans: Take Advantage of Low Mortgage Rates with Low Down Payment Requirements

The Federal Housing Administration (FHA) works with mortgage lenders to provide affordable home financing options for moderate income buyers, and buyers facing credit challenges. Some advantages of FHA loans include:

  • Low down payment: Most FHA loan programs require a minimum of 3.5% down as compared to 10% to 20% down for most conventional mortgage loans.
  • Flexible options for paying closing costs and UFMIP: FHA charges borrowers mortgage insurance premiums in two ways. At closing, you'll pay an up-front mortgage insurance premium (UFMIP) of 1.75% of your mortgage amount, and annual premiums of about 0.50% of your mortgage amount. You can roll the UFMIP into your loan amount, and FHA is also offers options for financing all or part of closing costs. using these options can depend on home value and other factors; FHA-approved mortgage lenders can provide details.
  • Credit-challenged borrowers may qualify: FHA guidelines for loan approval require verification of income, assets, and employment, but do not rely heavily on credit scores.

FHA is changing some guidelines; in the near future, borrowers with FICO credit scores of less than 580 will be required to make a 10% down payment.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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