New home-loan programs compete with FHA offerings - St. Louis Business Journal:

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The private mortgage sector has becomre more creative in options it offersto first-timde home buyers, local lenders say. The transition heateed up competition and helped push FHA usage saidAlbert Will, president of in "Demand has decreased," he said. "We're not a huge FHA lenderf like we were a fewyears ago, because therr are so many competitive opportunities for borrowers." Mark Unangst, seniodr vice president at Gershman, said FHA loans constituted about 70 percenty of the firm's loan packages less than 10 year s ago. "Things have reversed since abouft thelate '90s," he said. "Now FHA loans make up only aboutf 30 percent ofour business.
" While FHA loans usually require a 3 percent to 5 percent down paymentg from the purchaser, homeowners todagy can get into a house with littlse or no money down by usinf other programs. "People can take out first and seconx mortgages on their property up to 100 percent ofthe home'as value with some of these new so they don't need the cash Unangst said. Cathie Danna, a real estate specialist at for 17 said many home buyers can purchase their dream home for amere $500 with a Flex 100 which allows borrowers to finance 100 percent of theirt purchase price. "Many of us in the industry carry this so it's readily available," she said.
"Agents are reallh pushing the product." Although interesft rates are comparable in both types of FHA loans require much more paperwork and documentation thanconventionalp loans. "I don't have any issues with the way FHA isset up, but it'sw cumbersome for consumers, sellers and said Clay Baker, area American Equity Mortgage. "The application process is a lot more so it can be FHA also limits the amount it will securre for a home to less than while various conventional loan products go wellbeyoned that. Because of the difference in both Danna and Unangst said FHA loand generally are recommended most often for people withquestionablse credit.
"The sub-prime market is good for people who have recoverex from pastcredit problems," Unangst said. "It opens the whole market up for them." That flexibilith makes FHA loans more liberalthan private-sector mortgagde loans, Baker said. "Most loans are basesd on your creditscore ratio, but FHA leavea room for the underwriter's interpretation," he "They understand if a problejm was caused by a majof life event." U.S.
lawmakers, who must approvre any changes to FHA are considering ways to strengthen the FHA including a zero down payment optionjfor first-time home buyers designed to increases homeownership and better compete with conventional The Mortgage Bankers Association and National Associationn of Home Builders have supported the but the National Multi-Housing Council and National Apartment Associatiomn have suggested that offering more risky loans could overtasx the market.
Danna agreed, saying she's afraid the marker is going to "blow "I feel we'll see people overpaying on houses," she "Although your house is probably thebest investment, and it gainxs equity quickly, I believe there could be All the lenders interviewed agreed it'ws important for Congress to bolster the FHA program because of its role in the The program allows potential borrowers who usually pay cash for don't keep their money in the bank or don'tt have traditional sources of credit, such as a car to verify their payment history with other Unangst called the FHA programn "a good tool" that still comes into play with a lot of first-tims buyers.
"The government should be there to assist butthey haven't changed their regulationz in a long time," he said. "Wse have to make sure to find a balance."