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Old 11-28-2010, 01:21 PM
 
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I'm planning on buying a new home. In researching a particular neighborhood in Merrick, I noticed that many of the homes that closed (in the past 2 years) in that specific area were with FHA mortgages. Now, I'm not familiar with FHA mortgages, but upon looking it up, it appears that they are intended for individuals who have credit problems and might not qualify for traditional mortgages. What, if anything, does this say about the neighborhood I'm looking at? If my goal is to purchase a home in an upscale are, should I look elsewhere? Or is this (large # of FHA mortgages) a trend occurring in most neighborhoods of Long Island these days?
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Old 11-28-2010, 01:23 PM
 
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I wouldnt lose to much sleep over FHA loans. Alot of people going that route these days because you do not need 20% down.
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Old 11-28-2010, 03:08 PM
 
Location: under the beautiful Carolina blue
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It doesn't necessarily mean they have credit problems in the true sense of the word - when we sold out house last spring I was surprised when my realtor told me he had just done an FHA loan in Garden City, but he said they are often for people who are cash poor and in debt but with good prospects for employment. A perfect example is a doctor - tons of debt and starting their career later than most, but with excellent upside potential.
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Old 11-29-2010, 06:31 AM
 
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Since the meltdown banks are moving back to FHA's because they have zero risk. This was how it was prior to the meltdown.
Also, it's worth noting that FHA's have nothing to do with a persons ability to pay back a loan or qualify for one. Let's not forget that the bulk of foreclosures & short sales were caused by those holding convential mortgages.
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Old 11-29-2010, 06:42 AM
 
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FHA Loan just means that they don't have the requisite 20% that the banks demand now. Kind of ridiculous when you think that a starter home in some areas of Long Island is around 500k. Most people don't have 100k sitting in their bank account. This type of loan, atleast for LI, doesn't signal that they are cash poor, just not able to put down the 20%. So the bank will demand mortgage insurance, which is what the FHA sells. They don't give out loans to people with bad credit. Actually, you have to have pretty decent credit to qualify. It's just that these people don't have the 20% to put down.
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Old 11-29-2010, 06:53 AM
 
Location: Tri-State Area
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Quote:
Originally Posted by tomonlineli View Post
FHA Loan just means that they don't have the requisite 20% that the banks demand now. Kind of ridiculous when you think that a starter home in some areas of Long Island is around 500k. Most people don't have 100k sitting in their bank account. This type of loan, atleast for LI, doesn't signal that they are cash poor, just not able to put down the 20%. So the bank will demand mortgage insurance, which is what the FHA sells. They don't give out loans to people with bad credit. Actually, you have to have pretty decent credit to qualify. It's just that these people don't have the 20% to put down.

I concur. Qualifying for an FHA mortgage is even more difficult than a conventional mortgage obtained from your local bank, there are many more hurdles to jump through to obtain one. You may recall, that a few short years ago (2008-2009) the mortgage market was essentially frozen, even qualified buyers were unable to obtain mortgages - in steps FHA, most of the mortgages issued around this time period were through that federal agency program.
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Old 11-29-2010, 08:50 AM
 
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I agree with the rest. When we closed on our home in June, according to our mortgage people, approximately 40% of new homeowners were going with FHA loans b/c of the 5% minimum down payment required. (at the time, it was only 2.5% down). We opted for this because we didn't want to dump much of our savings into our down payment. The flip side to this of course, is that our monthly payment is higher. The penalty was that we were charged PMI because we didn't put down the required 20% to avoid it. I'm not sure you've arrived at a reasonable or valid conclusion from your research.

Merrick on a whole is a good area so I don't think you should stress it. The only thing that kills that area IMO are the taxes. But what area's aren't crushed by taxes right?

Good luck and don't sweat the small stuff.
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Old 11-29-2010, 09:40 AM
 
Location: Union County
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If it wasn't for FHA and its whopping $700k+ allowance for "high cost area" in the LI MSA there wouldn't be much of a housing market at all.
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Old 11-29-2010, 09:49 AM
 
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in 09 when we bought, obtaining PMI was much tougher then getting a mortgage itself. So, many people with higher scores, but smaller down payments still went with FHA because the MIP/PMI was easier to get.
Personally, our feeling was it was better to have money in the bank to cover an emergency than to shove it all into the house so we'd have more "equity" that can ebb and flow depending on the market (better to have the cash on hand).
Another benefit to the FHA loan was the ability to streamline re-finance, which we are doing to save another 1.25% over the loan we have now. No appraisals etc... very simple.

So... as said above, don't worry about using FHA loans as a sign that your neighbors are all "sub-prime."
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Old 11-29-2010, 11:31 AM
 
Location: Here
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My experience was some sellers actually shied away from FHA (not so much now but back a little ways) because they are harder to secure than conventional mortgages. I know our credit was superb, we just didn't have 20% to throw into a house right now, FHA saved the day but man what a pain in the butt to secure the loan.

Personally, and hopefully not a biased opinion but I view FHA as a sort of "loophole" (for lack of a better term) for good, hardworking and deserving people who should own a home and aren't being given a free ride either. I'd think those are the best neighbiors to have right now.

There are (or were) other "breaks" out there with max income requirements for sub-primers that we're all bailing out right now. Those are the neighbors to avoid..
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