FHA loan opens door to purchase

Millions of homeowners are, or soon will be, facing significantly higher mortgage payments as more than $140 billion in adjustable rate mortgages reset throughout the remainder of 2007. Another $380 billion are scheduled to reset higher in 2008.

In times past, many of these consumers simply would have refinanced their mortgage. But many are now finding that current lending restrictions and declining home values have made refinancing difficult. Enter one stalwart that is making a welcome comeback: The Federal Housing Administration loan.

Dating back to the 1930s, the FHA loan has traditionally been used by first-time home buyers because the program requires a down payment of as little as 3 percent, which can be gifted from a relative, and features relaxed credit guidelines.

Today, many homeowners also are turning to the FHA loan to refinance a home.

"Many homeowners are finding the FHA program to be their best solution," said Bob Walters, chief economist for Quicken Loans, which specalizes in helping homeowners with FHA lending.