Radford University finance professor examines FHA financing rate of return
For most Americans, buying a home is likely to be the largest purchase that they will make, “the largest debt that they will create and their greatest source of future net worth,” said Radford University Finance Professor Clarence Rose.
However, homeownership for middle class Americans is at near record lows even though mortgage rates are still close to record lows and the monthly costs of renting is more expensive than the costs of buying a home in many real estate markets in America today.
For most potential buyers, the availability of home mortgage financing and the type of home mortgage financing plays an important role in the ability to purchase a home, “the timing of the home purchase and the investment results achieved during the period of ownership,” Rose said.
When deciding to purchase a home, individuals and families have two basic choices, as Rose discusses in his latest research article, “The Rate of Return on Homeownership when Using FHA Financing.”
One choice is to take time to save money for the necessary down payment and pay down existing debt in order to obtain conventional home mortgage financing, which is less expensive, but more difficult to receive loan approval than FHA financing.
“The second choice is to use FHA (Federal Housing Administration) home mortgage financing, which requires a much lower down payment and is easier to qualify for home mortgage loan approval, but is a more costly source of home mortgage financing,” Rose explained in his recent article.
Published in the Journal of Financial Service Professionals, Rose’s research article examines homeownership rate of return when using FHA home mortgage financing over a 30-year ownership time period for each year of ownership under the current mortgage financing and housing market conditions. The results show that buying a home using FHA financing can produce rewarding financial results for home buyers under the current market conditions.
In addition to teaching at Radford University, Rose serves as director of the Center for Financial Education in the university’s Davis College of Business and Economics. Rose also serves as an advisor to the college’s Student Managed Investment Portfolio Organization (SMIPO).
He has published numerous refereed journal articles on topics such as Real Estate Finance and Investment Analysis, Social Security retirement decision-making and tax-sheltered retirement investment planning.
His work has been cited in the Wall Street Journal, Money magazine, Mutual Funds Magazine and other national publications.