Best Bet for a Home Loan Now
But Schwaber and Anderson warn against seeing FHA as a panacea. Here's why:

• FHA loans are more expensive than conventional loans backed by the traditional 20% down payment. Buyers with lower down payments, including those who turn to FHA, pay a bigger premium for mortgage insurance. "FHA is not like opening a gift on Christmas morning. It has good and bad to it," says Marc Schwaber.

• Borrowers should also watch out for predatory practices. Even though government regulators must approve FHA lenders, there have been reports of loan officers abusing the program and luring consumers into houses they cannot afford.

John Anderson says, "I warn consumers that when you shop for a lender, make sure that they are directly endorsed by the FHA." Anderson says those lenders are scrupulous, are experienced with FHA, know they can be audited, and work faster than mortgage companies who rely on a larger bank’s FHA underwriters to close a loan.

How can a borrower make sure that their lender is on the up-and-up? Schwaber says, "Call the state banking department and ask if the company is well rated. If they say this company has a lot of complaints, just because they show you the golden goose doesn’t mean it’s made of gold. Run things by an accountant."

  Despite all the bad news, these real estate pros are bullish on the deals to be had. Anderson says it’s an ideal time to think about getting into the market with an FHA loan. "Interest rates are down, inventory is up, prices are down, and there are motivated sellers."

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