FHA New Rules Pinch Would Be Buyers

When mortgage underwriting rules change making it more difficult to obtain an FHA loan, no one likes it.

In January; the FHS tightened lending requirements in order to shore up their capital reserves and help the agency to do a better job of managing risk.  Many of us complain about government waste and inefficiency…so this is a good thing.

According to John Anderson who chairs the National Association of Realtors Federal Housing Policy Committee, the change are serious and reasonable.

One change is raising its upfront mortgage insurance premium to 2.25% from 1.75% boosting the down payment to 10% for borrowers with credit scores below 580 while it stays at 3.5% for all others.  It also reduces permissible seller concessions from 6 to 3% for borrowers below a 580 credit score.

This ends up being a great incentive for borrowers to improve their credit scores so that they can qualify for the 3.5% down payment on an FHA loan.

It is crucial for the FHA to improve their financial health since they command about 40% of the mortgage market.  The NAR supports these changes saying the FHA is striking the right balance.

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