What Are The New FHA Home Loan Requirements?

As of January 20, 2010, FHA – the Federal Housing Administration has changed the FHA home loan requirements. This has made getting a home loan just a little bit tougher for those home buyers with weaker credit for those who do not have a lot of money for their down payment. Weaker credit means credit scores under 580 – although many FHA lenders do not approve FHA loans for those home buying applicants whose credit scores are under 620.

Important FHA Home Loan Changes for 2010

More Down Payment Money – If you credit score is less than 580 you will soon need to have at least 10% down payment versus the 3.5% that is required for FHA qualified borrowers with higher credit scores.

Seller Concessions – One of the great features of an FHA home loan is that it has always allowed for 6% seller assistance for the home buyer. The allowable seller assistance has been cut to 3%. This changes the game for those homebuyers trying to save money in using an FHA home loan.

FHA Will Seek Sharper Penalties Against Lenders who underwrite poor performing loans – This means that for home buyers, underwriting guidelines will get a lot harder to work through if you have marginal credit history, job history, or financials.

Each of these changes will most likely slow down first time home buyers who have traditionally looked to an FHA mortgage to buy their first home. This could negatively impact the home buying real estate market. This could extend the real estate recovery even longer. However, it seems to be a necessary change as there were a lot of marginal loans written in the past few years with the comfort of FHA loans being backed by the US Federal Government. With poor performing loans, the Feds are drawing a line in the sand to say – if you can’t keep good credit and a job perhaps you shouldn’t buy a home until you fix your credit.
All we can say is stay tuned Batman!