While the title says that FHA is the main loan program in Connecticut, the truth is that FHA is probably the main Loan Program in many other states as well. With all of the changes that have happened in the last year to Fannie Mae, Freddie Mac, PMI Companies, and changes in Appraisal Guidelines, have made FHA is a very attractive Loan Product right now.
In the past year we have seen Freddie Mac and Fannie Mae incorporate several point adjustments into the pricing of loans that are backed by them. There are hits for points if the FICO Score is under 740, further hits if the LTV is over 80%, and the price adjustments for Condo's, Multi Family, and Investment Properties are through the roof. In some cases the price adjustments make it impossible for Lenders to be able to do a loan.
On top of all this throw in the PMI Company changes that require a minimum of 10% down if a property is in a declining area, along with not issuing PMI if the Back Ratio is over 41%, and forget about getting PMI on a 3-4 Family house these days. With all of these changes Conventional Loans have become very, very difficult right now.
On the other hand FHA continues to only require 3.5% down, with no additional points assessed for LTV, Condo's, Multi Family, and Credit Scores (although some Investors have imposed minimum Credit Score Limits), Rates have also been generally lower on FHA Loans versus Conventional Loans, and Debt-To-Income Ratios are very liberal once again.
With a standard Conventional Loan a Borrower must always have at least 5% of their own money for the downpayment (excluding My Community, and the Flex Programs that are not being offered by anyone I know right now) it can not be a gifted. As oppose to FHA where non of the downpayment has to be their own money, it can all be a gift. Also FHA changed their Appraisal Process a few years ago, so now there are no real major concerns for all the repairs that FHA use to require, and there is no longer much difference between an FHA Appraisal and a Conventional Appraisal. OH yes there is one big difference from a Loan Officer or Broker prospective when it comes to FHA or Conventional Appraisals. A Loan Officer and Broker can still communicate with the Appraiser if it is a FHA Loan, but can not if it is a Conventional Loan.
As you can see from just this brief description, between Conventional Loans and FHA Loan, presently FHA is by far the Loan Product of choice these days, I know it is for me. And Realtors that advice their Sellers to not accept an offer if the Buyers are going FHA (and yes I am still running into this) are doing their Sellers a great disservice.
I am sure that in the future the pendulum will once again swing towards Conventional Loans again, but for right now FHA is clearly the Loan Product of choice in my opinion.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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