FHA downpayment assistance

Please read the article below. We have been talking in our office lately about these programs. They are being used by FHA loans as a way to still borrow 100% on the value of the house. You basically pay a 3rd party to be an intermediary in the transaction, and to hold the seller donated downpayment. Because FHA has a limit on how much down payment assistance can be taken, the seller is not allowed to directly credit the buyer the money. These companies take either a flat fee, or a cut of the money to facilitate the transaction. Now on the face, this looks like fraudulent activity. But when you look at it more closely…..well, it doesn’t look too much better. However, it does allow first time buyers to get into houses that they otherwise wouldn’t be able to finance.

If Congress closes this option, it will only further depress the housing market. It isn’t a large percentage of the houses closing right now, but all sold houses in this market count.

I tend to agree with the author of the article that this problem should be fixed, not abandoned.

The effect on Ashland Oregon real estate will not be that great. Most homes here are priced higher, and require more capital than these kind of programs help with. However, buyers looking to purchase in other parts of Jackson County, such as buying some Medford homes, could be shut out of the market.

This is yet another reason to not sit on the fence about buying a home. As these programs go away, it is becoming more difficult to purchase. So talk with your CRS Realtor (or ask me to find you a qualified Realtor) today, and find a good lender to see if now may be the time to pick up a good deal on a home, with a favorable interest rate, while assistance programs still exist.

Congress Ready to Nix Seller-Financed Loans

Congress is expected to pass a housing package this week that eliminates seller-financed mortgage programs.

Under these programs, nonprofit organizations finance the down payment for buyers, then home sellers repay the organizations. Millions of people have bought homes this way, but the Federal Housing Administration says the foreclosure rate on these transactions is four times higher than it is on its other transactions.

The Senate version of the housing bill banned seller financing; the House version did not. Negotiators crafting a compromise bill have agreed to follow the Senate’s position, which is also supported by the Bush administration.

“No insurance company can sustain that amount of additional costs year after year and still survive,” Brian D. Montgomery, the FHA commissioner, said in a recent speech.

But supporters of this kind of assistance say the system may have its problems, but because it is vital to low- and middle-income buyers, it should be fixed, not abandoned.

Source: Washington Post, Dina ElBoghdady (07/22/2008)