FHA Changes Can Put the Dream Within Reach

May 1, 1998

Those of you who work with first-time buyers know the feeling--that sense of personal and professional accomplishment that comes when you help turn a hopeful homebuyer into an actual homeowner.

In many instances, what makes the difference between putting up a Sold sign and watching an individual American Dream evaporate is the special help available through the FHA's single-family mortgage insurance program.

A long-standing federal program born in the desperate economy of the Great Depression, FHA has been a winner from the start. Financially sound and self-sustaining, it works. Just ask the millions of Americans who've benefited from this affordable alternative to conventional financing insured through the private sector. FHA opens the door for many without the means to become homeowners after failing to meet the more stringent loan qualification requirements set by private mortgage insurers.

If it has one flaw, it's that the FHA mortgage insurance limit in certain areas of the country has not kept pace with home price increases. If you live in an area where the home prices typically fall within the current mortgage insurance limits--which range from $86,317 to $170,362--you're in luck. The reality is, however, that despite the current housing boom, access to FHA is curbed by gross regional inequities.

You might conclude that this is a problem in higher-priced urban markets alone. Not true. In many rural areas, the FHA limit has not kept pace with new-home construction. As a result, many moderate-income rural families are unable to buy.

Help may soon be on the way. NAR has long advocated a single nationwide limit to address this problem. Andrew Cuomo, secretary of the U.S. Department of Housing and Urban Development, agrees. His department's 1999 fiscal budget includes a proposal to replace FHA's current staggered scheme with a higher, single, nationwide limit of $227,150.

If we're serious about boosting the homeownership rate in this country to a historic high of 67.5 percent by the year 2000, we need to make that proposal a reality. By allowing FHA to reach its potential, we'll help hundreds of thousands of our fellow citizens join the ranks of homeowners.

The American Dream. Expanding FHA's reach can make it come true.

R. Layne Morrill was 1998 president of the NATIONAL ASSOCIATION OF REALTORS®.

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