billddrummer

The Housing Crisis is NOT Over

To Tom,

Interested to know what a starter home price point is in Phoenix. Here in Northern NV, starter homes are beginning to become available below $200,000, in reasonable neighborhoods. Now, the primary loan product for starter homes has traditionally been FHA financing. FHA loans are still plentiful for most people with reasonable credit (even though FHA says it's not a credit score driven program, it's unlikely poor credit risks could qualify). And since the program only requires 3% down in most cases, the cash out of pocket is something borrowers can afford.

The biggest restriction to FHA qualification is the maximum debt ratio, which in my mind is still 28/36. Many people who used conventional financing with a second loan to cover part of the down could qualify for products with a higher debt ratio, up to 50% in some cases. (Not that that's necessarily a good thing, because the current foreclosure rate is testament to what happens when high debt ratio borrowers get into homes.) As we all know, most of those high debt ratio piggyback products are now gone.

But the problem is, many people have vehicle loans, credit cards and other amortizing debt that disqualifies them for FHA financing, even if everything else is OK.

Wondering if, in your area, FHA loans are becoming a larger percentage of purchase loans, and whether the people getting them are the ones who would have used conventional financing in the past.