FHA Loans make sense

The Federal Housing Authority or FHA is still offering low down payment home loans requiring just 3.5 percent down. Yes it is 3.5% and not 3%. The change went into effect January 1st. This is good news to anyone that is struggling to find a loan available to them do to the numerous issues with the credit crunch.

In the traditional, conventional loan market, you will not get a higher loan to value. Conventional loans are capped at 95% for the most part. Even you do 5% to put down you still may wan to look at a FHA loan because the monthly MI (Mortgage Insurance) may be more than you want to pay on a conventional loan.

The FHA does still have loan opportunities available, including loan programs offering 3.5 percent down. A low down payment is the critical aspect for many potential home buyers. Having 20 percent or more to put down on a house is a great way to get a low rate and it enables lenders to look at you more favorably. After all, after you have invested that much into the home, you are unlikely to just walk away from it. Since lenders are trying desperately to protect themselves from further foreclosures and subprime loans, they are simply sticking with what they know: those who invest in a larger down payment are less likely to walk away from their homes.