With all of the hoopla surrounding the government's various stimulus packages, much of the hype has been dedicated, second only to the 1rst time buyer tax credit, to new (really not very new) FHA and Rural Development Loans for home buyers without much cash. The difference for lenders being that these loans are insured by the government, which makes them a little more palatable to now-cautious lenders.

Billed as the first time buyer's entree into the housing market, these loans make it possible for buyers to have as little as a 3% down-payment for FHA or with the RDL program even have the sellers contribute up to 6% of the purchase price back to the buyers at closing to cover the down-payment and closing costs, essentially allowing buyers with NO cash to purchase a home.

The "new" FHA is, of course, really just the old FHA with higher borrowing limits and the RDL is really just the old Farmers' Home loan in a new package. The problem now, as in the past, is that unless buyers trying to use these loan products have sterling credit and cash in the bank, closing the loan is a low percentage endeavor. The new appraisal process is a nightmare and the underwriting is onerous in the extreme. In a nutshell, the "new" loans designed to help first timers and those with limited cash are not really much help and will again fall out of use of their own sheer weight in the same way that the "old" loans did.

Before this year, I hadn't written a contract FHA or RDL in the last twenty years because they didn't ever work out. I've tried a couple of the new ones this year and guess what - they didn't work out. I'll not be wasting any more of my time or my buyers' time with them.