While some are disappointed that FHA loans are being sidelined in the hot housing market, I am disappointed that so many Massachusetts buyers are using FHA loans to begin with. Massachusetts the city of Boston have long been at the forefront of designing innovative programs to create sustainable homeownership opportunities for low- and moderate-income (LMI) households. Real estate professionals who do not make their clients aware of these options are doing them a great disservice. In this hot housing market, LMI buyers need more buying power, not less.
FHA loans should be a last resort for borrowers who are ready for homeownership but cannot be served by more traditional underwriting. The range of low down payment, conventional loan options has been greatly expanded over the last decade. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible allow buyers to put 3 percent down utilizing PMI that can be canceled once the borrower reaches 20 percent equity. Many lenders have portfolio loans with even more flexibility. FHA borrowers will be forced to refinance their mortgages and pay closing costs all over again, just to remove the FHA mortgage insurance from their monthly payments.
A responsible first-time homebuyer’s best option is to purchase a market rate, multifamily property using the Massachusetts Housing Partnership’s ONE Mortgage or a MassHousing loan. Close behind that is purchasing a single-family house or condominium with either program. Both allow LMI homebuyers to accumulate the maximum equity in their new home, unlike with an FHA loan or a deed-restricted property. Real estate agents and closing attorneys can get involved with their local homebuying classes to help educate first-time homebuyers on the homebuying process and to educate themselves on the loan products and down payment assistance programs that may be available to their clients. You can find a list of the agencies and a schedule of upcoming homebuying classes on CHAPA’s website.
— Molly Goodman, board member, Abundant Homes MA