FHA Mortgage: Hawaii
From LoveToKnow Mortgage
Type FHA Mortgage: Hawaii into an online search engine and you will undoubtedly receive back a wide variety of lenders willing to accept mortgage applications. The truth is, however, that the FHA guaranteed just over two percent of the mortgages that were underwritten in Hawaii by September 2007. This is a relatively low number considering that almost 55,000 mortgages were underwritten in Hawaii during that period.
About FHA
The FHA was first established in the 1930's with the goal of helping first time homebuyers and lower income families achieve their dream of home ownership. These are individuals and families who need financial backing in order to obtain a conventional mortgage. While the FHA does not actually provide the loan, it does provide the lender a guarantee that in the event that the homeowner defaults on the loan the FHA will compensate the mortgage company.
The FHA thus enables the family to qualify for a mortgage with a lower down payment, which is typically three percent. In exchange, the homeowner pays an insurance premium to the FHA. In the event that the borrower defaults on their mortgage payments, the FHA will compensate the mortgage company.
FHA Mortgage: Hawaii Issues
The High Cost of Real Estate
One of the key contributing factors for the low number of FHA Mortgage: Hawaii is the low lending limits imposed by this federal program. The cost of real estate in Hawaii is relatively high, particularly when compared to most other states. However, until recently, the FHA has only guaranteed loans up to $544,185, an amount that is much lower than the median cost of a single-family home in Hawaii. As a result, anyone who wants to buy a home that is worth more than this limit could only finance the purchase through a non-FHA mortgage.
Red Tape and Cost
As much as Hawaii's mortgage brokers want to offer their clients FHA-sponsored loans, a major drawback that they face is not only the associated costs but also the bureaucracy involved in processing the loan. These brokers estimate that doing business through the FHA generally costs them $5,000 to $10,000 a year, just to meet the federal audits and other administrative requirements involved in participating in the program.
An unfortunate result of this red tape and additional costs is that many Hawaii mortgage brokers do not currently promote this federal program. The volume of business they can generate from the FHA market is simply deemed insufficient to warrant their time and money. In contrast, it is far less expensive to offer conventional loans through banks and other traditional lenders.
The Rise of Alternative Sub-prime Mortgage Lenders
Over the past two decades a number of alternative mortgage lending alternatives have been made available to first time and low income homebuyers. This has directly cut into the FHA’s core market. For example, with the rise of the no-money-down sub-prime lending programs of the 1990s, there was a decline in the demand for FHA loans. In Hawaii alone, there was a 32 percent decrease between the years 2000 and 2006.
Today, however, the mortgage crisis that is crippling the real estate market has led to a tightening in the standards of the sub-prime mortgage industry, as fewer private investors are willing to finance non-prime mortgages. Several sub-prime lenders have been run out of business or have cut back drastically on the number of new mortgages they issue. As a result, Hawaii's first-time and lower-income homebuyers now find doors closed to them that the sub-prime market would have otherwise opened.
Hawaii's New Loan Limits
Hawaii's real estate industry has been lobbying for a major overhaul of the state's FHA mortgage program. A major step in this direction occurred this year when legislation was finally passed increasing Hawaii's FHA mortgage lending limits. In effect, this increase broadens the reach of the program, making FHA home loans accessible to more residents.
Further, more and more of Hawaii's homeowners are defaulting on their mortgages due to the drastic spikes in their adjustable rate mortgages rates. With the new legislation a larger number of these homeowners may now refinance their mortgage through the FHA, as long as the reason for their default resulted from the adjustment of their ARM mortgages.
FHA Lenders in Hawaii
There are over 100 lenders in Hawaii that offer FHA mortgages. To find a lender in your area that is authorized to provide FHA loans, visit the Find an FHA Lender page of the government's Housing and Urban Development site. A brief list of lenders includes the following. The links take you to the official site for these lenders.
This page has been accessed 88 times. This page was last modified 14:18, 11 April 2008.
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