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FHA Makes Borrowing Easier for Rebound Buyers

Question: Does a short sale hurt your chances at buying a house again?

Answer: It may not hurt your chances as much as you may have initially thought.

The Federal Housing Administration is giving rebound buyers a second shot at owning a home, reports The Los Angeles Times. In an attempt at kick-starting the housing market, the FHA is loosing their pocketbook when handing out loans. According to the Times, the FHA has been allowing these rebound buyers to get loans a mere three years after foreclosure and with as little as 3.5% down.

Is this a foolish move by the FHA? Many think it is. Keep in mind that the FHA isn’t making these loans — but it is backing them.

The problem that many critics see is that many people put themselves into debt by living outside their means. These people are now thrown into the mix when the FHA loosens its rules on backing these mortgages.

In fact, it might sound a whole lot like the type of lending behavior that led to the housing market crash of 2008. High risk borrowers were getting loans without a problem and eventually, were unable to pay these loans back.

There are also those who are for relaxed lending. Many say that the economy needs stimulation and that lending is vital to a good economy.

Of course, if more loans are going out, then borrowers need to pay close attention to their mortgage documents. These complex and sometimes confusing documents can mislead borrowers into believing certain terms and conditions.

If you’re in the market for a mortgage, then be sure to ask the lender for a Truth in Lending Disclosure. Make sure that you get all the details up front from your mortgage broker. And if you need help deciphering the legalese in the mortgage document, contact a real estate lawyer.

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