Qualifying for FHA Loan Will Get Tougher
In an effort to shore up its disappearing reserves, the Federal Housing Administration has issued new loan standards which will go into effect this summer. FHA is an important source of loans for first time homebuyers and those who have struggled to get credit scores into range to be able to qualify for a home loan. The tighter standards will affect the number of people who receive loans starting this summer.
Specifically, applicants will be expected to have
Higher credit scores.
FHA has not required a minimum score to date, but will require a minimum of 580 under the new guidelines. Those with scores at the lower end will need to make at least a 10% down payment.
Fewer acceptable seller concessions.
Presently sellers can help with closing costs up to 6% of the property value. The new maximum will be 3%.
Higher insurance costs. The new insurance premium will be 2.25% of the value of the loan. Currently the premium tops out at 1.75%. For example, in a $150,000 home the premium that will need to be paid at closing is $3,375, up from $2,625 under current guidelines. The additional expense can be rolled into the cost of the loan.
FHA News
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