Right now, there are a lot of changes taking place in FHA mortgage guidelines. As they raise the bar to try and reduce the number of foreclosures, most of those changes are making it more difficult to qualify. This article provides current guidelines for employment and income so that you can take the steps necessary to make certain that you will qualify when you would like to get an FHA mortgage.

We will be covering credit qualifying guidelines in a separate post.

First of all, for some time employment guidelines have remained constant. You must be employed, and you must have an employment record of at least two years in the same field. School counts. So, if you just graduated from a program which took at least one year, and now you have been working in that field for at least one year, you have two years and your employment qualifies.

Other sources of income, such as social security disability or child support, can also count as income. Social security disability counts as income, provided that it is going to continue to at least three years. The same qualification and time line applies for receiving child support. As long as you will continue to receive any of these for at least three years, they count toward your income in qualifying you to purchase a home.

After income, we need to look at your front end debt to income ratio. Don't worry. This one sounds complicated, but let me explain it easily, and then we'll move on to the slightly more technical terms.

Let's assume that you''re looking at a $100,000 house. Your monthly payments on that house to the bank will include the interest on the loan, the principal (which is the amount that you will pay down the loan every month), one month's worth of homeowners insurance, and one month''s worth of property taxes.

On this hypothetical $100,000 house, your total payment to the bank will probably be pretty close to $775 dollars. Your front end debt to income ratio will then depend on your gross monthly income. If your gross annual income is $30,000, we divide that by 12 months in a year to get $2,500 per month.

And, now for the math: take the monthly payment on the house of $775 divided by your gross monthly income of $2,500 and we get the number .31, or 31%. Generally for FHA, the maximum front end debt to income ratio on your house payment is 31%, so this example works, perfectly. That also means that in order to qualify for a $200,000 house, your income would have to be right around twice the $30,000 per year in this example, or $60,000 per year.

Finally, there is another type of debt to income ratio called your back end debt to income ratio. This one looks at your house payment PLUS your monthly car payment(s), student loan payments, furniture payments, etc. AND the minimum payments on all of your credit cards, combined. For an FHA mortgage, the maximum back end ratio is 43%.

In practical terms, if we continue on our above example for the borrower who earns $30,000 per year and would like to buy a $100,000 house, that means that they can generally have additional monthly payments for cars, credit cards, etc of up to $300 per month and still qualify for that same house. THIS IS IMPORTANT: if their monthly payments on all of these exceeds $300 per month, then they will have to qualify for a less expensive home.

In our next entry, we will cover FHA credit qualifying guidelines.

Still have questions? Please, post your questions and comments, below, and we''ll address them.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, FHA, qualifications

I am writing a series of posts covering different customer profiles to discuss for whom an FHA will work best. This is my first which is for the home buyer who has excellent credit.

If you are wondering "Is an FHA mortgage right for me?" there are two main things to look at.

1. Do you have excellent credit?
2. What is your available down payment?

Right now, I would define "excellent credit" as someone who has a middle credit score over seven hundred (700) although, there is still even better financing options available to home buyers with higher than a seven hundred and forty (740) credit score or even a seven hundred and sixty (760) credit score. (Above a 760, there is, generally, no further improvement.)

For clarification, if you're asking, "What is your middle credit score?" here is the answer. You have three credit scores, one from each of the three credit reporting bureaus. Your middle score is NOT the average of the three. Instead, it is the score that is between the other two. Example: if the three credit reporting bureaus show that you credit scores are 723, 759, and an 805, then your "middle" score is the 759, because you eliminate the highest, the lowest, and the remaining score is your middle score.

As far as down payment, the maximum loan to value (LTV) with an FHA mortgage is currently ninety-six and a half percent (96.5%). The maximum LTV for a non-FHA mortgage (also called a "traditional mortgage") is ninety-five percent (95%) and you will be required to purchase Private Mortgage Insurance (PMI) unless you are putting down at least twenty percent (20%) for your down payment. There is an excellent calculator here that shows you the PMI options and costs based on the combination of your credit score and LTV.

You can secure a traditional mortgage with PMI as long as your middle credit score is at least a 680. (If you have less than a 680 credit score, we will discuss it in a separate post.) Interestingly, according to this calculator if you are going to borrow 95% of the purchase price and are going to finance the PMI, your savings over the first five years of the mortgage is only eight dollars. Yes, that's only $8.

In my opinion, the takeaway is that the magic number is having a credit score of at LEAST a 680. Once you have that, as long as you are putting down MORE than five percent (5%), then the traditional mortgage is, most likely, the better choice. (If you need to work at improving your credit score, either to exceed the 680 threshold for a traditional mortgage or the 620 threshold to qualify for an FHA mortgage then fill out this short form to speak with someone about your options.)

It would seem that the only instance in which FHA is the better choice for a borrower with excellent credit is when that borrower does not have much in the way of savings. Why? Well, for starters you can borrow up to 96.5% of the purchase price. AND, FHA allows all of that down payment money to be a gift from a relative. Further, FHA does not require that the borrower have any savings in reserve above and beyond the amount of money needed to close the mortgage. In contrast, traditional mortgages will require that the down payment is your "own" money (not a gift) and that you have two months of your mortgage payments set aside in savings AFTER you've paid for your down payment and closing costs.

While it is a personal decision, I would argue that it is *very* risky to tap your last dollar of savings to buy a house. If you've never owned a home before, please keep this in mind: Things. Will. Break. It's not a matter of "if". It is a matter of "when". And, "when" things go wrong, they will ALWAYS cost money to fix. Water heaters. Roofs. Furnaces. Etc.

To take this one step further, it is often seen as the best financial decision to wait to buy a home until you have at least twenty percent (20%) to use as down payment. There was an excellent article in the Philadelphia Daily News, recently, that covered that exact topic. Yes, twenty percent is a LOT of money, but this is the opinion of financial advisors, including one of my favorites, Suze Orman.

Does that answer your question(s)? What other questions or comments do you have for me? Please, post in the comments, below.

Join the conversation and comment, below.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, credit, FHA

On Friday, March 26, 2010, the Obama administration announced a new program that will allow underwater homeowners (homeowners whose current mortgage is larger than the value of their home) to refinance into an FHA mortgage.

This new FHA refinance expansion is designed to help stem the tide of foreclosures that is going on, right now.

Details of the new program:

• Only borrowers who do NOT, currently have an FHA mortgage would be eligible for this new program.
• Borrowers would need to be current on their existing mortgages.
• The bank holding the first mortgage would have to reduce that mortgage by a minimum of ten percent (10%) in order for it to qualify, and the maximum new FHA mortgage would be for a maximum of 97.75% of the home's current value.
• A second mortgage could remain in place as long as the combined loan to value for the new FHA mortgage and the existing second mortgage did not exceed 115% of the home CURRENT value. If the second mortgage brought up the combined loan to value above 115%, the mortgage holder would have to agree to reduce the amount of its existing mortgage to bring the total to a maximum of 115%.
• The payment of the new FHA mortgage cannot exceed 31% of the borrowers gross monthly income and the borrowers total debts cannot exceed 50% of their gross monthly income. For a much more detailed explanation of debt to income ratios see our previous entry here. The section most relevant begins on paragraph five (5).
• Borrowers must have a minimum 500 middle credit score. The intention behind this latest program is to help reduce the number of foreclosures by enabling homeowners to reduce their monthly payments, and, essentially, to reduce some of the debt on these under water homes to further assist people to stay in their homes. If successful, the program could not only keep homeowners in their homes, but it could also keep housing values from falling and extend the beginnings of a housing recovery.

As of this writing, I have not been able to find information about specific lenders who intend to participate in the program, but I will add updates as they become available.

For further reading, look to Market News International, The San Francisco Chronicle with Bloomberg, Business Week, and Reuters.

Do you think that this is going to help reduce the number of foreclosures going on out there? Is it wise for the government to knowingly add underwater mortgages to their portfolio? Please, comment below, and let us know your thoughts!

Join the conversation and comment, below.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, FHA, refinance

Last Friday, the Wall Street Journal reported that the FHA might be taking too much risk and stands a good chance of having to go to congress for additional money.

It says that there are too many FHA mortgage loans to borrowers who will run a high risk of foreclosure. This is the money quote, "Such underwater borrowers are generally more likely to default if they lose their jobs or have trouble meeting mortgage payments, because they can't easily sell their house." (My emphasis added.) Note, the reason that these mortgages are "underwater" defined as the borrower owes more than the property is worth is that the houses they bought have gone down in value since they were purchased, like most houses, in this country over the last several years.

Unfortunately, the Journal didn't get an FHA representative to effectively answer that specific claim. So, let me take a crack at it, using a quote from FHA commissioner, David Stevens.

As we noted in a recent blog post, when speaking in Denver, Stevens said, "our primary job is to serve the underserved buyer." Pretty good quote, actually.

The buyer who has ten or twenty percent of the purchase price to put down for a downpayment is generally not the one for whom the FHA is intended. Yes, that buyer would be a better risk because, should that person have their home value go down, they are more likely to be able to absorb the loss. But they had the capital to begin with. Borrowers who have the ability to save that kind of money are typically not needing the assistance of the government to become homeowners. It is the "underserved borrower", the one of limited means, who works for a living that the WSJ article suggests is too risky because, after all, that person might "lose their job".

Most of us would be a in pretty bad place pretty quickly if we lost our job in this environment. And, employment history is one of the things that FHA looks at in determining qualification: FHA is trying to find people who have job stability. In this recession, prior job stability is not necessarily an indicator of future job stability. So, should the FHA stop loaning money to working people who are only able to save up enough down payment for an FHA mortgage?

The argument can be made that we should limit the amount of mortgages that the FHA will insure. I have even heard arguments that the FHA should be abolished, altogether. They would say, "Let the free market handle it." That is a discussion and a conversation that we, as a nation, could have.

But, arguing that the FHA is lending to the wrong people (ie. lending to the ones to whom it is supposed to lend) is disingenuous. If they'd like to discuss whether we should keep an institution that has long been favored by the public, the same institution that has been helping the housing market since the real estate collapse started, then lets have that discussion. Let's not imply that those working people whom the FHA is intended to help are suddenly not worth our efforts. Those are not the people who got us into this mess. But, assuredly, they are the ones with the most to lose if FHA tightens up any further.

What do you think? Are the current guidelines appropriate? Or, is it time to reel in FHA lending?

Join the conversation and comment, below.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, FHA, loan

As we've discussed, before, the changes in the FHA credit guidelines have been going on long before FHA announced their impeding updates. That's because while the FHA may insure the mortgages, the banks that originate them are under constant scrutiny by the FHA to insure that those mortgages perform and that the borrowers are able to afford them.

Right now, if you have lower than a 620 credit score, you'll want to address that and drive it up so that you will qualify for a mortgage. Further, if you already have a credit score that is above a 620, there are actions that you can take, right now, to improve it, which may qualify you for lower payments, less money down, or even more money out if you are trying to take equity out of your home with a cash out refinance.

The Washington Post just ran a good article on why your credit score may have recently fallen, even if you are doing everything right.

Here at MyFHA, we've turned to our own circle of lenders who regularly help our customers get mortgages and asked them for ways that you can work on improving your score, right now. This is what they shared.

Let sleeping dogs lie.

Do NOT initiate a payment plan on any old collection accounts. While it may seem counterintuitive, sometimes paying on an old account can change it from an "old" delinquent account into a "recent" delinquent account which can have a much more negative impact on your score than just leaving well enough alone.

Dance with the one that brought you.

Now is the time to stay with the lines of credit that you already have. No new ones, and do not cancel any old ones, either. If you want more credit or a different credit card, there will be plenty of time for that once you've closed on your new mortgage. Right now, keep the lines that you have, even if they are at higher interest rates than you could get somewhere else and even if they are with one of the "BIG BANKS" and you've decided (like a lot of other people) that you don't want to work with them, anymore.

Don't use it all up.

The magic number for the percentage of available credit that you use that reflects "well" on your credit score seems to be between ten and twenty percent (10-20%). This means that if you have ten thousand dollars ($10,000) in available credit, you should not carry more than one to two thousand dollars ($1,000-$2,000) on your cards at any one time. And, make sure that you spread it around. One of the lenders that we interviewed for this piece told us that they recently helped one of their customers increase their credit score by a full sixty-seven (67) points in less than one month by having them pay down one maxed-out credit card. That can have an enormous impact on qualifying for the best mortgage.

There you have it. These are the three quick steps that you can take to drive up your score in a short period of time. If you need assistance addressing more substantial problems with your credit, just let us know, and we'll put you in touch with someone who can help.

Join the conversation and comment, below.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, credit, FHA

Yesterday, I clicked on a Tweet from a friend who is a Florida Realtor, Debbie Kirkland. Debbie had a link to the Ginnae Mae calculator which compares the price of buying a home versus renting. It is absolutely worth taking a look at, here. VERY cool! However, you really gotta watch out for the bias that this calculator, and others like it, have in favor of buying. What do I mean by that? Let's take a quick look.

What's there?

Well, appreciation is there. Two percent (2%) of it, to be precise. The default setting for the "Yearly Home Value Increase Rate" is two percent. Now, you can change that number, but you can't make it "accurate". How can it not be accurate? Well, according to Zillow in the last twelve months, home prices have actually dropped by five percent (5%). When I tried to enter that number into the calculator, it unequivocally said, "The Value You Entered Must Be A Positive Number." So, there's that..

What's missing?

The calculator does not take into account any transactional costs. When you go to sell your home down the road, most home-owners will enlist the help of a real estate agent. (As with all professionals, always interview several before you decide on which one to choose.) There will be a commission for your real estate agent's services. In my experience, that can range anywhere from four to seven percent (4-7%) of the sales price of the home, and according to Mortgage News Daily, that will be in the neighborhood of six percent (6%). On a one hundred and fifty thousand dollar ($150,000) house, which is the default on the calculator, that's nine thousand dollars ($9,000). That's a fairly large chunk of change to leave out of the calculation, and the significance will be even more apparent in my next point.

The thing:

Yes, there's a thing. So when you look at the calculator, it is set to default to a one hundred and fifty thousand dollar house ($150,000), with two percent (2%) annual appreciation, for ten (10) years, and yadda, yadda, yadda... if you hit "calculate" it says that you will come out thirty-four thousand and sixty-three dollars ($34,063) ahead for buying versus renting. That's kinda huge! A total no-brainer, you really should buy.

If, however, we change the annual appreciation to "zero" (the lowest number that it will accept) and then subtract out the nine thousand dollar ($9,000) real estate agent commission when they sell the house for you in ten years, you come up with saving five thousand and sixteen dollars ($5,016) by renting, another no-brainer. Of course, you should rent.

I won't argue here whether you should or should not buy a home. (In the interest of full disclosure, I'll share that I've been a homeowner since 1997, and in that time I've owned and lived in four different houses.) But, don't let a calculator like this influence your decision when it's this biased.

Reasons for renting should include flexibility to move when you'd like, absence of maintenance as the landlord takes care of things, and the ability to quickly change your quality of living should something unexpected happen that is either good (like a promotion) or bad (like a reduction in hours).

Reasons for buying should include the privacy that no one who is not a guest can enter your home. There is the stability that no one can tell you that your lease is up, and it's time to move. There is usually a backyard for barbeques with family and friends. There is the freedom to decorate and paint any way you'd like without worry that it's going to come out of the security deposit.

There are any number of reasons to look at for renting and for buying. Most of these are intangible. They don't have a price tag, and they can't be added to that calculator.

Whether to buy a home is a big decision, and one that should make with a full weighing of all of the costs and the benefits. But, putting too much weight on how well you'll "do", financially? Well that requires that you have a crystal ball that's in good working order. Or at least one that's more accurate than Ginnie Mae's calculator...

So, what do you think? What are the most important reasons for you when it comes to buying or renting? Comment, below, and let us know!

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, loan, calculator, renting versus buying

I have seen an awful lot of information (and misinformation) flying around the web regarding the changes to FHA Credit Guidelines. Over at Housingwire, homebuilders are pulling a Chicken Little, suggesting that the sky shall, indeed, fall as guidelines and seller contribution toward closing costs are changed. And, at the other end of the spectrum, Hot Air suggests that we need to tighten credit requirements much, much more or else the end is neigh.

(As I have already said in a previous blog entry, FHA Commissioner Stevens has clearly stated that the purpose of the FHA is to serve the under-served buyer: the ones whom the banks are less willing to assist, which means that in the coming weeks and months, Hot Air will have much more material about which to complain.)

Historically, FHA mortgages have not been credit driven. FHA, which actually insures mortgages without loaning the money, itself, has not and does not, now, have a minimum credit score. In reality, though, the banks who actually do the lending part of the equation have been tightening up their credit qualifications.

As reported recently in the Chicago Tribune and Bloomberg, the FHA has stated that it intends to raise the downpayment requirement on borrowers with less than a 580 credit score to ten percent (10%) down. In order to qualify for only three and a half percent (3.5%) downpayment, you will need to have greater than a 580 middle credit score.

An even more important point in both the Tribune and Bloomberg articles is that most banks, brokers, and lending institutions are no longer giving FHA mortgages to borrowers with lower than 620 credit scores.

And, there you have it. FHA will require a ten percent (10%) downpayment if your middle credit score is less than a 580, BUT almost every bank and brokerage that is selling mortgages insured by the FHA (and, certainly, every one that I've found) is requiring a minimum 620 credit score to get financed.

What this means to you, the consumer, is that if your middle credit score is less than a 620, you will not be able to secure an FHA mortgage until after you've taken action to address your credit score. Period.

If you'd like to speak with someone about addressing your credit issues, just let us know, and we'll have someone contact you.

Author's note: Why am I including so many links within these articles? Well, as the late Senator Patrick Moynihan said, "Everyone is entitled to his own opinion, but not to his own facts." In the blogosphere, there is so much opinion being bandied about as fact that I want to make sure that here, we provide links back to the primary literature whenever feasible. I am keeping the information on this page factual, and I want to give you every opportunity to review the primary sources and form your own opinions.

Join the conversation. Comment, below. Tweet. Call us out or voice your support.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, credit, FHA

Over the weekend, John Rebchook of InsideRealEstateNews.com, wrote an excellent piece complete with video links on FHA Chief Stevens' visit and address in Denver, CO.

Now, over recent months, we have been hearing increasingly loud shouts that FHA should tighten its qualification guidelines, and FHA has decided to do just that. However, the FHA was specifically put in place in order to help people that were not being helped by the banks. As part of FDR's New Deal, the FHA was designed to help people of more modest means become homeowners, even when the banks were shoring up their assets which made it more difficult for borrowers to access capital. (Sound familiar?)

Fast forward seventy-eight years, and if FHA reacted to the current housing problem in the same way that other lenders were, by increasing both down payment requirements and credit score requirements, then wouldn't that be effectively pushing out the very people that it was created to help? As someone who follows developments with FHA closely, I've been concerned about this for some time.

Fortunately, FHA Commissioner David Stevens is committed to staying the course. When he spoke in Denver, Stevens said that “Our primary job is to help the under-served buyer in Atlanta, Georgia, or Detroit, Michigan, or New Orleans, Louisiana.” (Emphasis added.)

Now that the insurance premiums have been modestly increased from 1.75% to 2.25% of the total loan, and the minimum credit score in order to qualify for 3.5% down payment has been raised to a 580, the under-served buyer can still get the help that they need, and the FHA can shore up its reserves.

There will still be cries to raise the down payment even more. Critics will say that buyers need more "skin in the game". My hope is that Commissioner Stevens will become a more vocal proponent of letting FHA be what it was established to become.

What do you think? Is FHA on the right path, or should it tighten its requirements, further?

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: credit, announcements, FHA

As of February 1, 2010, HUD brought about the end of "Spot Loan" approvals for condos. The ramifications of this are substantial.

Now, if the condo complex is not already approved, the entire project will have to "be submitted for full review by HUD staff." (See question number three on that HUD page.) Essentially, the process by which condos become FHA approved just became much more onerous. Unfortunately, there's more...

Even if a condominium or townhouse complex is already approved, there are concentration guidelines outlined in HUD's Mortgageed Letter 2009-46B (see point number ten in that letter), which will require constant monitoring

Explanation: in order to avoid overexposure, HUD has outlined "concentration" maximums of thirty percent (30%). (If a condominium complex has ten units, that means that no more than three of those units can have an FHA mortgage on them at any one time.) Once a complex meets its maximum concentration, no further case numbers will be issued unless and until one of the pre-existing FHA mortgages is fully satisfied.

Confounding this further, condominium approvals expire every two years requiring recertification, AND there is no place on the HUD webpage that indicates exactly which addresses, if any, already have FHA mortgages. HUD does not indicate whether a case number will be issued on a unit which already has an FHA mortgage, which would allow a unit to pass FHA eligibility along from owner to buyer. Nor, do we know how often HUD updates its public database.

In order to assist you, MyFHA has found a private company that maintains a database reputed to be even more accurate than HUD's. FHA Pros constantly monitors concentration of FHA approved condo and townhome complexes by keeping updates from title companies across the country. These updates include which units in which complexes close with an FHA mortgage. In this way, their information is the most up-to-date that we have been able to find. And, yes, we have blind-tested their services before giving our endorsement.

As with any endorsement that MyFHA delivers, we ask you, our customers, to please keep us informed of any problems that you may encounter as well as your successes with FHA Pros either by posting, below, in the comments, or send an email directly to me, jssmith (at) myfha (dot) us.

Yes, we expect that these changes are likely to affect both the market and the ease with which you can finance a condominium. We will continue to keep you posted as more news, both positive and negative, is released on this and other changes.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: announcements, condos, condominiums, approved

Yesterday, we discovered that the FHA capital reserves have dropped below the legal limit of two percent of all outstanding home loans. (Read more about that here and here.) While this is worrisome, there is already blowback and warnings that this could be the next agency set up for a "bailout".

Before we discuss a bailout, lets calmly look at something. What would it take for the FHA to require an additional cash infusion or a "bailout" from the taxpayers? Two different scenarios are cited and if either of them, or both were to occur, more money would be necessary.

1. If interest rates on home mortgages fall to two percent or less, the assumption is that so many people will refinance out of FHA mortgages that there will not be enough FHA insurance premiums to cover their reserve requirements.
2. If unemployment hits 12.5% and house prices decline another 30%. Both of these are disaster scenarios and if they should come to pass, we will have much bigger fish to fry than FHA requiring a bailout. Not to mention that if these happen, the bailout required would be approximately $1.6 billion, or less than 2.3% of the money that we spent to shore up financial institutions through the Trouble Asset Relief Program (TARP).

This is not an insignificant amount, but for an agency that has been doing good work since 1934, we should try and keep some perspective.

There will need to be much discussion and debate on this, but I would like to make one suggestion before we begin. May we, please, keep the debate focused on the philosophy we take towards the FHA, and not just focus on the risks that FHA should or should not take?

The FHA was founded after the Depression when banks were so risk-averse with their lending practices that it was very difficult for many Americans to become homeowners. The FHA was founded to offer insurance policies to the banks so that more people could buy homes. That worked out fine for seventy-five years, until we were visited by the greatest housing bubble and crash since the Great Depression of 1929.

The FHA has, historically, helped borrowers get mortgages who wouldn't, otherwise, be able to buy a home. And, right now, we're all pretty fatigued from bailouts to Fannie, Freddie, TARP, GM, etcetera, etcetra, and so on, and so forth. Personally, I'm conflicted on this. But, let's be careful and try to keep some perspective as we begin this discussion so that we're not making decisions entirely out of emotion. There is more at risk, here, than 1.6 billion dollars, and if the FHA becomes as conservative with its lending practices as the banks, will it serve any purpose, at all?

And, so, let the discusion begin. What are your thoughts on this? I'd like to know.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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One of my "pet projects: in this blog is to keep everyone apprised of the states that still allow down payment assistance, and, until it expires (currently scheduled for November 30, 2009) the First Time Home buyers tax credit to be applied toward down payment for FHA mortgages.

As of this writing, Virginia allows the eight thousand dollars ($8,000) First Time Home Buyers tax credit to be used toward or as the three and one half percent (3.5%) down payment required for FHA mortgages.

Details are all outlined on the VA Housing Authority's page, here. While I'm happy to be able to report on this, I learned of it through an online discussion, and it was brought to my attention by another one of the participants.

I will continue to add more details as they develop.

Please, feel free to add comments if you have additional information, and, especially any links providing official additional information.

If you want to keep informed on the latest developments on news and policies effecting the FHA and FHA mortgages, follow us on Twitter, facebook, or our RSS feed. Or, you can follow our Little Debbie addicted author, John Scott Smith, on Twitter.

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Tags: mortgage, FHA, DPA, down payment assistance