Saratoga News

Homes

The Real Deal

FHA reform can open doors for buyers

The National Association of Realtors, which includes about 4,000 Realtors and affiliates from the Silicon Valley Association of Realtors, strongly supports the passage of the Federal Housing Administration reform package recently approved in a mark-up vote by the House Financial Services Committee led by U.S. Reps. Bob Ney (R-Ohio) and Maxine Waters (D-Los Angeles).

HR5121, the Expanding American Homeownership Act of 2006, would raise FHA loan limits, eliminate restrictive down payment requirements, provide risk-based mortgage insurance premium flexibility, and extend the possible terms of FHA loans from 30 years to 40 years.

All of these changes will help make homeownership more attainable.

"The Expanding American Homeownership Act will make FHA a more viable tool for first-time home buyers and lower- and moderate-income families, and many others pursuing the dream of homeownership," Ney said, following the successful committee mark-up.

"It is also the most substantive FHA reform legislation undertaken by Congress in over 15 years. Not only will hundreds of thousands of additional families have the opportunity to own their own home, but this legislation will improve FHA's relevance and competitiveness in the housing market."

"On a typical loan, these changes will save many families hundreds of dollars per month, opening the door to the American Dream for thousands," said NAR President Thomas M. Stevens. "We commend the House Financial Services Committee for taking this important step to make FHA once again competitive in the home mortgage arena. With interest rates climbing and housing prices at all-time highs, it is imperative to have a modernized, effective FHA product."

While John Tripp, president of the Silicon Valley Association of Realtors, hailed the move to make FHA competitive in home mortgages, he said, "FHA loans have not been competitive and not used much in this area because the conventional market is so competitive now. The real issue is the conventional process has become more streamlined and efficient for all borrowers. There are lots of good options out here."

An FHA loan allows an individual to buy a house with as little as 3 percent down. Traditionally, the FHA loan program was a way for first-time buyers, or anyone with a shortage of down payment funds, to buy a home. In recent years, however, the conventional market has offered the public so many options for home loans the popularity of the FHA loan program has declined.

The FHA does not make home loans; it insures them. If a home buyer defaults, the lender is paid from the insurance fund. To get an FHA home loan, you need to have a good credit history and sufficient income to qualify for the loan.

"For over 70 years, the Federal Housing Administration has made homeownership possible for millions of Americans at no cost to taxpayers. With the proposed reform legislation, FHA will continue to make homeownership available for millions," said Stevens.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.