Mortgages insured by the Federal Housing Administration aren't the morass of paperwork they used to be, according to an expert in the product.

"With the technology tools that are available today," Renee Pierce, president of Quality Mortgage Services in Altamonte Springs, Fla., said, "the product is as easily processed, approved and closed as competitive products."

One Internet tool that's "imperative" for government-insured lending is the FHA connection, according to Pierce, who does private training for her firm's clients. "It's like your own private pipeline to the FHA," she told a group of mortgage brokers recently.

Accessed with password protection, the connection allows loan agents to obtain the required FHA case number, choose an appraiser, obtain clearance of the borrowers' social security numbers and a host of other information.

"It's your private, on-line, lender-secure hook-up" to the FHA, the trainer said. "And it will help you be much more efficient. It doesn't mean your borrower is just going to fly through (the approval process), but it should help decrease the amount of documentation."

Pierce, who has been in the housing finance business since 1979 when she went to work for a private mortgage insurer, said FHA-backed loans are products every lender should have on their mortgage menus.

"They're not just for first-time home buyers anymore," she explained. "There are advantages to the program that make it an excellent choice for many buyers."

Over the years, but particularly in the last 18 months, a number of changes have been made to enhance the program, Pierce said. Some have not been so good as others, she added. But for the most part, they have made FHA loans a "very attractive choice," not just for borrowers but lenders, too.

The trainer listed these advantages:

• Low down payments -- For the most part, borrowers need downpayments of only 3 percent of the purchase price.

• Gifts -- Cash required for closing may come from someone else as a gift. Typically, the donor is a relative of the borrower.

• Reserves -- Unlike most conventional loans, which require borrowers to have enough cash on hand at closing to cover two months worth of house payments, the FHA has no reserve requirements.

• Debt-to-Income Ratios -- The current ratios are 29 percent/41 percent. That is, borrowers are permitted to spend up 29 percent of their monthly income on housing and as much as 41 percent of their earnings can be earmarked for all their debts and still be approved for a mortgage.

  And with compensating factors, underwriters can go higher. If the house is new construction that's energy efficient, for example, the back-end ratio can be as high as 43 percent

• Credit -- A good credit history is required. "This is not a B-C product," Pierce said. "A person cannot have 5-6 pages of credit problems."

  But the FHA does not require credit scores, so it's "an excellent alternatives" for buyers with little or no established credit.

• Seller Contributions -- Sellers can contribute up to 6 percent of the sales prices in the form of closing costs, prepaid items or discount points. "Six percent on a 3 percent down loan is a good deal no matter how you cut it," the trainer said.

• Loan Limits -- Maximum loan amounts are not as high as on conforming loans, but they are "competitive," she pointed out. And they rise in lockstep with increases in the Freddie Mac ceiling.

For more articles by Lew Sichelman, please press here.

Published: August 6, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.