FHA loans have always been a great way for a young (just beginning) family to get into home ownership. They require less down payments, have lower requirements for income and other qualifications. They are generally guaranteed by the government.
However, the recent price downturn has caused some problems with them. At a time when buying is at an all-time great, many are left out because they are unable to save enough to make the down payment (even though it is small) and pay all the closing costs.
A home seller might offer to pay some or many of those closing costs in order to get their home sold. Makes sense, right? That’s the normal way of doing business. But, in an effort to prevent a repeat of the financial meltdown FHA has limited the amount that can be contributed by sellers.
On the other end of the equation, in order to get our economy on the road to recovery (or moving faster) we need to get the foreclosures off the market (read sold). Prices and interest rates are creating that perfect buying scenario for the beginning home owner, and they are a great source to clean up the REO market.
This is the group of buyers willing to put in the work as required on some of these homes. With sweat equity they then have more home than otherwise possible. It just makes a great way to get started, and helps the market at the same time. It cleans up our neighborhoods, stabilizes the market, puts more people to work…the list goes on.
Well, it looks like the FHA is NOT seeing this, and may lower the limits on seller contributions allowed. This will make it harder, or impossible, for some to buy. While we do not want a repeat of the meltdown, we do think the recovery needs a little help.
$ To read the full notice from CAR click HERE.
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