FHA Home Loan Applications Drop

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The first week of September saw a 2.5 percent decrease in mortgage applications, according to a Fox Business report .That decline includes applications for government-backed FHA home loans. The data was collected and evaluated by the Mortgage Bankers Association (MBA). The MBA uses weekly surveys to aggregate data on conventional and FHA home loans. The survey for the first week of September covered more than three-quarters of US home financing applications.

The MBA survey findings revealed that application rates fell almost across the board for other categories of home financing. According to the survey, the average rate on 30-year fixed FHA home loans fell from 3.6 percent to 3.54 percent.

Borrowers are generally interested in FHA home loans since they have lower qualification requirements when compared to conventional financing. FHA home loans are widely seen as being excellent options for borrowers with poor credit histories and low-incomes. These allow borrowers to obtain a home when they otherwise would have been unable to through a conventional lender.

Despite these attractive features, borrowers cannot afford to take on debt when the economy is still weak.

Applications for refinancing existing mortgages also declined. Low interest rates attract homeowners seeking to refinance their homes, but unfortunately stricter lending requirements and economic uncertainty have prevented many potential borrowers from modifying their existing financing.

The survey results arrive on continued reports of weak job growth. Unfortunately, job growth—however weak—does not inherently imply an increase in home financing applications.

Many Americans still have the fresh memory of the housing bubble in their minds and may be wary of purchasing homes even at the current low prices in the housing market. Despite some financial reforms, even homes purchased at low prices can still result in ballooning payments.

Time will tell if continued economic uncertainty, as well as the looming Presidential election, will continue to decrease applications for home loans by brewing uncertainty in the minds and wallets of prospective mortgage applicants.