Brad Zimmerman over at NuWire Investor recently wrote this:
As far back as the Great Depression, Federal Housing Administration (FHA) loans have been helping Americans with poor credit buy homes. Recently lost in the shuffle of skyrocketing housing prices and a wave of subprime loans, the FHA loan is back.
The late 1990s and early 2000s were not good to the FHA loan, as its stringent guidelines and mortgage limits were pushed aside by the easier-to-obtain subprime loan. The subprime loans offered lax qualifications such as higher debt-to-income (DTI) ratios and no-money-down options. In addition, subprime loans did not have as many strings attached to them such as the strict appraisal process. For most people, the subprime loan was clearly the more attractive choice, and the FHA loan began to fade into oblivion.
Recently, though, a steep rise in foreclosures and subprime lenders filing for bankruptcy has had a negative impact on the once popular subprime loan. As the subprime loans are disappearing, the old FHA loan is now making a comeback. Most people who were familiar with the FHA loan prior to its virtual disappearance might not realize that the program as it exists today is very different.
