Buying and Selling Real Estate

Owning a home is a dream cherished by many people. Unfortunately, not everyone is able to afford a home. So when terms of loans are relaxed, many people seize the opportunity to pursue their dream of becoming a homeowner. This is what transpired when conventional Adjustable Rate Mortgage loans (ARMS) hit the market. Banks financed almost every applicant who applied for home loans and offered the option of a small down payment and a low introductory adjustable rate. People jumped at this opportunity and purchased their dream home, even though for many it was beyond their means.

With the increase of sales volume, real estate prices began to rise. Introductory rates started to adjust and interest rates on mortgages began to climb. Homeowners who had opted for these conventional loans experienced a drastic increase in their mortgage payment almost overnight. Many could no longer afford their home. As real estate prices continued to fall, homeowners attempted to negotiate with their banks. Many were unsuccessful. Most were forced to short sell, or simply walk away from their homes. The increase in the number of defaulters had a cascading effect on the economy leading to the highest recorded number of homes in foreclosure in recent history.

FHA Loans to the Rescue

Federal Housing Administration loans, commonly referred to as FHA loans, have the backing of the Housing and Urban Development which is actually a cabinet department of the executive branch. These loans have been in existence since 1934. When the real estate bubble burst, homeowners were looking for any solution to save their homes. This brought visibility to the FHA, which have relaxed loan requirements, modest down payment requirements, and competitive interest rates.

As property values dropped and interest rates adjusted, FHA mortgages gained popularity. Because FHA loans are less restrictive, more people qualified for these loans. Many homeowners switched to FHA loans and locked in their rates.

Until about 3 years ago, only 3% of the population had FHA loans. Today close to 50% of American homeowners have refinanced their homes and were able to stabilize their financial situation with the help of FHA loans.

Impact on the Economy

FHA loan programs have saved many homeowners from foreclosure during these tough economic times. The absence of these loans could have had a catastrophic impact on an already fragile economy.

Today, the real estate market is slowly improving, however many Americans are still feeling its devastating effects. With the help of FHA loans, we look to a future real estate market that will not only allow Americans to dream of one day owning a home, but one that will allow Americans to own a home they can truly afford.

Phil Harris, has been in the mortgage industry for over 14 years. In the last 5 years he has specialized in FHA Programs. For more information on how FHA Loan and Refinance programs can help save your home too, visit http://www.fhalimit.com/

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