I neglect my blog, it’s true. But it’s time for another installment since I got the urge. Today’s post is to glorify FHA loans for borrowers with less-than-perfect credit, little credit history, high debt-to-income ratios, or little down payment funds available.

Since my last post a year ago there have been vast changes in the mortgage industry. You are probably already aware of the fact that an entire section of the market is completely gone, being subprime loans. It’s a big factor in the current economic conditions we’re seeing in our country. That being said, FHA loans are about as good as you can get for less-than-perfect loan applications.

Don’t worry if you aren’t sure what an FHA loan is. If you feel like getting all the details, go ahead and visit hud.gov to get more info or drop me a line and I’d be happy to walk you through the basics. The most important part for borrowers is that FHA loans offer flexibility while basically nobody else does. Rates are just about the same as a conforming 30 year fixed rate to boot.

It seems to be the case, at least for non-profit Habitat for Humanity, that rising land prices in the Saint George area have pretty much stopped new Habitat homes from being built. Check out this article from KSL.

It’s hard for me to believe that there is no available land anywhere around Saint George for less than $150,000 a lot, but if that is the case then it’s pretty remarkable that demand down there is so high. Perhaps there is room for a big developer to purchase land a bit further away from the hot spots and build some less expensive housing. It certainly sounds like it.

It will be interesting to see if Washington County median home prices topple approved FHA maximum loan limits, effectively nullifying FHA availability down there. That would be a major blow to the lower-middle class around Saint George as far as home ownership goes - especially for first time home buyers. FHA is not really an option (unless limits have been drastically increased lately) in the higher priced areas like California, Arizona, and Las Vegas. Hopefully St George doesn’t join that group.

Elsewhere in Utah the mortgage situation seems to be unaffected by the drastic increase in home values over the last year or so. FHA already increased it’s limits to around $225,000 along most of the Wasatch Front. So for the most part, getting a mortgage loan in Utah shouldn’t be too difficult for most people.

I recently posted about the IRS rescinding tax-exempt status from several non-profits acting as down-payment-assistance (DPA) charities, and how this would hurt buyers with low down payment money and some bumps in their credit.  Well, there’s still at least one DPA organization that is conducting business as usual, with full endorsement from the IRS and the FHA.

Buyers Fund is actually based in Utah - Provo to be exact.  They have issued a news release confirming their status as non-profit, with a link to the IRS website where you can lookup their charitable status on your own, if you like.  I did the search and sure enough, there they were.

(As a sidenote, you can look up the status of any organization that claims to be a charity on that page.  Might come in handy the next time you want to donate to a disaster relief fund of some kind.)

So what this means is that Borrowers who qualify for FHA loans are still able to also qualify for a 3% down-payment-assistance grant from Buyers Fund, making it easier to purchase a home.  FHA is a great program for many borrowers because it allows for dings in credit, has low down-payment requirements, and much better rates than subprime mortgages.  And believe it or not, FHA is one governmental organization that is completely self-funded and has been for many years.

This is some pretty big news in the mortgage and real estate world. The IRS decided to rescind the “non-profit” status of organizations that enabled buyers to purchase a home with no down payment on an FHA guaranteed loan. Without “non-profit” status, the funds coming from said organizations are no longer acceptable for use under FHA guidelines.

This will surely affect many would-be home buyers. There is talk from FHA, however, that changes to their guidelines may be forthcoming.

More information from RealtyTimes here.