Forgotten Your Password?

Need to Register?

Don LaPlume

The Crackdown on FHA Mortgages

Saturday, February 11, 2012 - Article by: Don LaPlume - Emery Federal Credit Union - Message

That's right, there is a Crack Down on FHA Mortgages going on right now. If you plan to purchase a home or refinance a home using an FHA mortgage be sure to stay tuned. I will be releasing updated data as it comes out from different investors. Here is what I'm talking about. FHA itself is not changing rules it is actually the investors who buy FHA loans and provide the market liquidity for these mortgages. All of this is being instigated by FHA however. The deal is, FHA rates investors who fund FHA loans based on the performance of those loans. In simple terms, if the loans perform everyone is happy and the investor has a good FHA Total Score Card rating. If the loans an investor funds default, than the investors FHA Total Score Card rating gets hurt. Once there score reaches a certain level FHA shuts them off. Meaning they can no longer write FHA insured loans. This makes sense. Reward those who make good loans and punish the banks that make poor loans. Obviously there is a lot more to it than this but that is the gist of it. Here is how it could affect you: Banks and investors will no longer fund FHA loans to those with lower credit scores. Just a few years ago a 500 credit score was fine. Currently it is difficult to go below a 620 credit score and now it is getting more difficult to get these loans with a score below 640. Example -1 of the investors that I work with now requires anyone who purchase or refinances a home using an FHA loan whose credit score is between 620 and 640 to have a minimum of 2 months of mortgage payments taxes, insurance and mortgage insurance in the bank at closing. This money can not be a gift and it must not be used for the closing costs or the statutory down payment the loan requires. Another investor cut the size of the mortgage a person with a sub 640 credit score can qualify for by 30%. Not all investors have changed their guidelines but typically they all follow suit. Once one begins the others will follow. The herd mentality in the mortgage market. Moral of the story - more hoops to jump through are coming. So if you are looking to use an FHA loan do not hesitate! Let me know what you think about these changes. Good or bad. Always enjoy your feedback! Wishing you all the best! Don LaPlume

Related Searches:

Didn't find the answer you wanted? Ask one of your own.

Get an answer
Subscribe to our news feed.