FHA loans are getting more popular

As lenders toughen their standards, loans by backed the Federal Housing Administration (FHA)are increasingly popular. The number of FHA loans issued rose 126 percent in the first quarter of 2008, compared with the same period a year ago. Most of FHA's business now comes from refinancing.

The volume of FHA loans at Wells Fargo has increased 342 percent this year from the same time in 2007, says Greg Gwizdz, the company's national retail service manager. Helping increase business were live simulcasts for real estate professionals that the lender recently held in movie theaters nationwide touting the benefits of FHA loans. Only borrowers who can make at least a 3 percent down payment or have at least 3 percent equity in their homes and who can document their income can qualify for FHA loans.

Guy Cecala, publisher of Inside Mortgage Finance, says FHA paperwork remains daunting and the rates aren’t always the lowest. “But if your choice is vanilla ice cream or no ice cream, vanilla starts looking good," he says.

Source: The Washington Post, Dina ElBoghdady (06/10/08)