September 26, 2021

MP Now News

Mortgage News

Some People With FHA Loans Being Shut Out Of Housing Market

One of the hottest housing markets in recent years is excluding some people using government home loans.

When budding homebuyer Shay Morris qualified for a Federal Housing Administration-insured loan earlier this year and began looking for a home, she quickly realized how difficult it was going to be.

“I saw a house every day, but then I just got discouraged because I know I really don’t have a chance to speak to realtors and other realtors,” said Morris.

With the demand for homes in Indianapolis skyrocketing, it’s not uncommon for dozens of listings to be made once a home is listed. As a result, some sellers only ask for cash or conventional credit.

Amy Nelson, executive director of the Central Indiana Fair Housing Center, said some sellers also prioritize buyers who can bear additional costs, creating inequalities.

“Unfortunately, the best deal for them is someone who doesn’t ask much more of them and makes the maximum amount of money with the least amount of restriction,” said Nelson.

Nelson said she saw more than 200 entries in Marion County specifying conventional loans through federal programs.

FHA loans were created to increase home ownership by giving buyers lower down payments and lower credit ratings. Nelson said the loans have been beneficial in the past.

“A great advantage are black and brown communities, which are often excluded from this property purchase process due to the loss of this generational wealth.”

In this market, people with FHA and VA loans find disadvantages. FHA loans have rating and inspection requirements to ensure a safe home. Often times, buyers with traditional loans can cover additional costs and offer larger down payments that buyers with FHA loans cannot. Morris experienced that.

“I just don’t have that much cash,” said Morris, “as a first-time home buyer sitting in the bank. I also don’t have a current home that I could use as equity. “

Morris has put her search on hold for the time being and is losing the equity she is trying to build up.