FHA Home Loans to the Rescue - Help for Homeowners
by Brandon Cornett
You can't turn on the TV these days without seeing a news story about the U.S. economy in general and the housing market in particular. Starting in 2007, we began to see record numbers of home foreclosures, a trend that continued into 2008 (and one that shows no sign of slowing).
But for many homeowners, help is on the horizon. And it comes in the form of FHA refinance loans. Let's take a closer look at this new program and what it promises to do.
Housing and Economic Recovery Act
The recently passed Housing and Economic Recovery Act of 2008
will help "at least 400,000 families" who are struggling with their mortgage
payments and facing foreclosure. It will do this by providing FHA-insured
refinance loans to switch the homeowners from high-rate ARM loans to lower
fixed-rate mortgages. For those accepted into the program, the end result
will be a lower monthly payment and more desirable fixed rate that will no
longer adjust / increase.
History of the FHA
The Federal Housing Administration was created in 1934, during the Great Depression, to make home financing available to a greater number of Americans. The FHA does not actually make home loans to consumers. Instead, they insure certain loans made by private lending institutions.
You've probably heard the term "government-backed financing" before.
The FHA program is an example of this. By having government insurance in
their favor, private lenders are more willing to offer mortgages to borrowers
they normally wouldn't qualify (due to credit problems or other qualification
issues). The lender is assured of getting their money back on the loan, even
if the homeowner defaults and stops making payments. That's what the FHA
The Refinancing Angle
Traditionally, the FHA program was focused on helping buyers
in the purchase of a home. But as a result of the aforementioned Housing
and Economic Recovery Act, the program is being opened up to homeowners who
want to refinance. According to the HUD website, "an estimated 400,000 borrowers in danger of losing their homes will be able to refinance into more affordable government-insured mortgages." The
program is slated to begin in October of 2008. To find out if you are eligible,
visit the HUD website or refer to the Home Buying Institute resources mentioned
at the end of this article.
Getting Away from ARM Loans
The goal of this new program is two-fold. It is designed to help struggling homeowners who have adjustable-rate mortgages (ARMs) convert to fixed rates. It's also designed to lower their mortgage rates in the process. Lower rates and less uncertainty -- a double win.
About the Author: Brandon Cornett is the publisher of Home Buying Institute, a website that offers advice for home buyers and mortgage shoppers. To learn more about FHA loan program or related topics, visit the Institute at http://www.homebuyinginstitute.com