Featured News

Are FHA Fees Holding Back the Recovery?

Anyone with a less than perfect credit rating is likely to find it pretty hard to get a loan these days, but it also seems as if FHA fees are holding back a full housing market recovery.

An article in American Banker points out that the Federal Housing Administration has raised its fees so much that many Americans cannot afford them, which is bad news for the economy and the real estate market. According to figures from the National Association of Realtors, the numbers of first time buyers are now at historic lows, at around 28%. This is 6% less than the five-year average, and is far below the 40% figure which is seen as being a benchmark value. This fall in the number of first time buyers has led to the lowest levels of home ownership seen in two decades.

© maxmitzu - Fotolia.com

While high FHA fees may be a contributing factor, the recent economic crisis has been particularly hard on young adults aged between 24 and 35, a group that traditionally accounts for many first-time purchases. Large numbers of people in this age group are encumbered with high levels of student debt, and stricter credit conditions have made it much harder for them to get a mortgage.

The Federal Housing Administration provides mortgage insurance for first time buyers, and this is paid for through upfront fees and monthly premiums. If the buyer subsequently defaults then the lender is repaid from the FHA fund. This mortgage insurance has been in place since the 1930s and has helped more than 34 million Americans purchase property. However in recent years the FHA was forced to raise its premiums in order to cover the high number of defaults seen during the financial crisis.

There is no doubt this was necessary at the time, but fees still remain high some five years on. These can add an additional $120 onto a monthly mortgage payment on an $180,000 loan. In addition the upfront fee has increased from 1% of the loan to 1.75%. Apparently these increases in premiums pushed 1.5 million people renting property over sustainable debt to income levels required to qualify for home loan last year.

This year it’s expected the FHA will help approximately 450,000 first-time buyers, but while this figure may seem huge it’s around a third lower than it should be. Between 2009 and 2013 the FHA helped approximately 690,000 first-time buyers each year. The article in American Banker points out that a new approach will be necessary if the economy is to benefit from an increase in first-time home purchases.

Allison Halliday

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.

Recent Posts

Unlocking the secrets of real estate gaming

We live in a world where virtual landscapes have become playgrounds for exploration. Real estate…

6 hours ago

Navigating the Future Landscape: How AI is Revolutionizing Mortgage Lending

The financial industry, characterized by its intricate networks and substantial data volumes, is undergoing a…

7 hours ago

eXp Realty Agents Take Center Stage for EXPCON 2023, Real Estate’s Ultimate Agent-Centric Event

 eXp Realty®, “the most agent-centric real estate brokerage on the planet™” and the core subsidiary…

7 hours ago

Century 21 Brand expands to the Charlotte Market with the Cornelius Brokerage

Broker/Owner and Top Charlotte Producer Elevates his Company as a New CENTURY 21 Affiliate Century…

1 day ago

JPAR® “Know More Grow More” Series to Focus on Recent Industry and Market Changes

JPAR®, an influential player in the real estate industry, is proud to announce the second…

1 day ago

The Ultimate Guide to Top Home Devices for Pest Control

Pests are unwanted guests in any household, causing a variety of issues from spreading diseases…

1 day ago