News, insight and some thoughts about the Sacramento-area real estate market

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March 26, 2008

FHA: It's going to bail us out

Many are saying that a loosening of restrictions for traditional Federal Housing Administration home loans will be a major stimulus for the Sacramento-area housing market. John Arvanitis, president of Citrus Heights-based Sunrise Vista Mortgage Co. says flat out: FHA is our savior.

These government loans, which have long helped lower- and moderate-income people buy houses with low down payments, virtually disappeared during the housing boom. The government had capped them at $362,790 and few homes were selling for under that. Besides, anyone could get a risky adjustable loan with no money down and not stating your income so who needed them?

Now that risky behavior has mostly disappeared and the old dependable FHA loan is back. For the rest of this year the government is allowing FHA loans up to $580,000. That means more options for people with blemished credit scores and homes that have lost value. Most FHA loans require only a 3 percent down payment in a time when regular banks are requiring 5-10 percent down.

Bottom line: It means more people can borrow and buy, a critical ingredient in getting the housing market moving.

Incidentally, Arvanitis said the capital-area market has found its floor in the $200,000 price range. The proof is multiple offers. He believes the next 60 to 90 days will tell whether that begins to hold true for houses up to $400,000.

I asked Arvanitis what the new FHA changes mean for the Sacramento market. Here is what he had to say Wednesday: