FHA loans can ease the mortgage squeeze - Los Angeles Times- Topic: How Does Money Lending Interest Work
Loans insured by the Federal Housing Administration fell out of popularity in recent years as sub-prime mortgages and other alternative financing became readily available and as home prices zoomed past the program’s limits. But with mortgages now much harder to get and the maximum FHA loan size sharply increased by recently passed economic stimulus legislation, the program is enjoying a revival. And for buyers with little money for a down payment — or owners who want to refinance but have little equity — FHA loans may be the only financing available. However, the FHA does not insure nontraditional loans such as “payment option” adjustable-rate loans. On the bright side, the FHA doesn’t discount the value the appraiser comes up with to account for a declining price environment, as many other lenders are now doing, said Jeff Lazerson, president of Mortgage Grader, a Web-based loan shopping service. The interest rate on an FHA loan is likely to be about one-eighth of a percentage point higher than the market rate on a comparable uninsured loan. Learn more
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