A lot of good people are worrying that they may face foreclosure due to rising interest rates on their loans. These good people may have taken out loans they shouldn’t have – loans that reset at vastly higher interest rates after the first couple of years. These good people may have had credit problems in their pasts, or they may have bought homes which they couldn’t afford (and some may have fudged the numbers on their applications, too).

One of the unfortunate effects of this is that people now entering the real estate market looking to borrow may be shut out from finding a mortgage loan.

There is hope for these people, in the form of the Federal Housing Authority (FHA).

You may be able to find an FHA loan at a much-lower interest rate than what subprime lenders are advertising.

The reason why FHA loans haven’t been used a lot here in Boston is because there are lower limits on how much you can borrow. Right now, the limit is $363,000, which will get you a normal-sized condo in Dorchester or JP or a sliver of a space in the Back Bay. There is also a fair amount of paperwork that goes into getting approved, which means you need to have patience.

I’ve yet to have a client who used an FHA loan, as far as I know (my clients’ financial dealings are private between them and their banks).

(To clarify, I believe the FHA loans are really “FHA-insured” loans – FHA isn’t lending you the money, they work with banks who lend you the money. Because the loans are guaranteed by the federal government, your local bank isn’t risking its own money, making it more appealing to them.)

There are other things to know about using an FHA loan. For the right borrower, this option could be a good one to explore.

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Updated:  1st Q 2018

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