I am glad to see this thread...
FHA (Federal Housing Administration - a Division of HUD Housing and Urban Development) insures the first 38% of these loans against
delinquency/foreclosure.
In simple terms that means a Lender (which my company is) can afford to take a greater credit/income risk on a future homeowner IF FHA insures his/her
loan because I know I am guarenteed 38% from the insurance policy (known as U.F.M.I.P. - Up Front Mortgage Insurance Premium). This means I can
"Quick Sell" a $100,000.00 house on the open market for $62,000.00 and still get my original $100,000.00 back in the event of foreclosure.
This is a WONDERFUL use of Government and the pooling of the many to help the few that has been a RESOUNDING success for well over 40 years.
It is about time FHA realized that zero percent down is a viable program, especially since the V.A. (Veterans' Administration) has been doing it
SUCCESSFULLY for over 40 years.
A study I recently read indicated that the single biggest barrier keeping many folks from buying a house is the requirement of saving up the 3% down
payment.
While there has been many "work arounds" to this over the years (much like Bob88 described) the law has always required a "minimum investment" by
the buyer of 3%. While that 3% can be gift funds from parents or employers it is still a sizeable amount of money for many.
I applaud GWB's efforts to make the American Dream more available to one and all and look forward to funding as many of these loans as possible and
assisting thousands of hardworking Americans get into a home OF THEIR OWN...
PEACE...
m...
[Edited on 1-29-2004 by Springer]