Another government housing program has had to reduce its subsidies. The free market has been constantly under attach by government intervention over the past 20 years but reality wins out.
FHA mortgages are steadily getting more expensive and private sector mortgages may be a better deal. The FHA is running out of money to subsidize mortgages and as a result it must raise its fees and its standards.
Mortgages with no-down payments were all the rage leading up the 2007 crash as particularly young people without the ability to make a substantial down payment and faced with skyrocketing housing costs made desperate deals to buy a home, convinced that home prices were only going to go higher.
And who weakened the standards for mortgage loans? Principally the federal government out of a desire to increase the percentage of Americans who own their own homes.
Kenneth Harney reports: If you want to buy a house with minimal cash by using an FHA-insured mortgage, here’s some sobering news: Because of an ongoing series of fee increases and underwriting tweaks, those mortgages are getting steadily more expensive and may not work for you.
The Federal Housing Administration is the largest source of low-down-payment mortgage money in the country. Its minimum down is just 3.5%, compared with 5% to 20% or more from conventional, non-government sources. For decades, FHA financing has made homeownership possible for first-time buyers with modest incomes and credit history blemishes.
But in the wake of losses tied to bad loans insured during the housing bust years, the FHA has been raising its loan insurance fees and backing more loans to applicants with higher credit scores. With the latest increases, things have gotten to the point where some lenders wonder whether the agency is trying to move away from its traditional customers.