According to a press release issued by the mortgage bankers association, FHA loans now account for one third of all new purchase money mortgages. In the month of June, 38.6% of all new homebuyers used a FHA loan, compared to 27.8% last year. In the month of June, the FHA endorsed 94,069 mortgages.
Government insured FHA loans are attractive for first time homebuyers due to the low down payment requirement of 3.50%. Also, the FICO standard for a FHA loan is 620 or better, allowing for minor credit blemishes. FHA loans can also be combined with a grant or down payment assistance program to reduce closing costs.
Conventional financing has been more difficult to obtain over the last year. This is due in part to higher FICOs required for mortgage insurance and higher down payments.
Although underwriting standards for both FHA and conventional programs have tightened considerably since 2007, new home sales to first-time home buyers are on the rise, stabilizing prices and rebuilding communities, thanks to the FHA loan program.
Interest Rates for July 10, 2009
Conforming Conventional 30Yr Fixed 5.5%
Conforming Conventional 15Yr Fixed 4.75%
Conforming Conventional 5/1 IO ARM 4.5%
FHA 30Yr Fixed 5.5%
* Above Conventional rate quotes are as of 7/10/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required. No origination or discount points.