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NAR Talking Points ~ FHA Mortgage Insurance Program
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Mortgage interest rates have been at their lowest levels since the early 1970s,
making housing more affordable in recent months to first-time buyers.
Still, many people face problems coming up with funds for a down payment
and closing costs. In the first quarter of 1999, the typical first-time
buyer lacked nearly 15 percent of the income needed to buy a typically
priced starter home. It is clear that many first-time buyers still lack
purchasing power. We applaud Congress for helping to make the Federal Housing Administration (FHA) more accessible and affordable for the people it is intended to serve, by approving the 1999 HUD appropriations bill, which raised the FHA mortgage insurance limits to a higher range with a minimum limit of $109,032 and a maximum limit of $197,620. HUD subsequently raised these limits to $115,200 and $208,800, respectively. This adjustment in the mortgage insurance limits is allowing FHA to meet the needs of prospective buyers who don't qualify for conventional financing, but who would qualify for FHA financing if the program were accessible to them. Another provision in the legislation provides uniformity to metropolitan areas with several different FHA limits. Since FHA limits are assigned on a county-by-county basis, some metro areas have a variety of limits, making FHA confusing for people considering different counties for their home purchase. The legislation applies one limit to each metro area, with that limit being the highest county limit currently within the area. Estimates indicate that over the next five years, the FHA change could provide homeownership opportunities for up to 175,000 additional households who do not currently qualify for conventional financing, and it could generate $715 million in additional government revenue. Tax legislation that took effect in January 1998 is helping some first-time buyers overcome affordability problems. The law permits entry-level buyers to take penalty-free withdrawals of up to $10,000 from tax-deferred retirement savings to be used for home purchases. The law applies to Individual Retirement Accounts (IRAs), and allows withdrawals from the IRAs of relatives -- such as grandparents or parents -- to be used toward the purchase, as long as the total sum withdrawn does not exceed $10,000. Modest gains have been made in the homeownership rate for some groups. The homeownership rate for the under-35 age group rose slightly from 39.0 percent in the first quarter of 1998, to 39.4 percent in the first quarter of 1999. Despite these gains, however, there is the continuous need for increased cooperation among housing organizations at the local, state and national levels to expand homeownership opportunities. Reproduced from www.realtor.org "For The Record": Spring/Summer 1999 - Talking Points for Association Executives |
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