Here is some updated information on FHA loans from my friend at The Mortgage Advantage
“Did you just attend an F.H.A seminar sponsored by H.U.D. or by a non-lender? Take all of the hand outs, walk to your nearest trash can, open the lid, and throw them away. FHA is going through changes and the information you have may not benefit you or your clients.
The down payment assistance programs such as Ameridream or Nehemiah are getting pummeled by F.H.A. In today New York Times it was reported that FHA expects to lose 4.6 billion dollars because of the high default rates due to the down payment assistance programs. A third of all F.H.A. loans are “zero” down. An unprecedented 60% of F.H.A.’s loss is directly attributed to the assistance programs.In 2000, the D.P.A.’s only accounted for 2 percent or less of FHA loans. Before the announcement made the papers, Lenders were already adjusting their programs. Some now have a higher interest rate to make it harder for the borrower to qualify if they are utilizing Ameridream or Nehemiah. And do not even think of raising the purchase price to cover the down payment and closing costs. It has become a hard fact that if borrowers get into a home without putting any money down, there is no emotional or financial reason to stay.At least if dear old Dad gifts the down payment, the borrowers are less likely to walk away. H.U.D. does not have a credit score minimum. Awesome!Except…… All lenders now have minimum credit score requirements.A few months ago, 550 was the minimum credit score with no rate increase.Now it is 600. Some will go to 580, but with gut wrenching rate adjustments.Some lenders are increasing the rate for credit scores below 650.
Do you have a married borrower that wants to purchase a home sole and separate? FHA will allow a spouse to purchase without their hubby but ……credit will be pulled on the other spouse and all of their credit history will be included in the ratios. So those wascaly wabbits that though they could walk away from one home since it was in hubby’s name, and purchase another home in just her name are going to have find another program called the “stay in your current home or rent for a very, long time”.
No credit?That is okay with H.U.D.!Well, maybe. Lenders are becoming more reluctant to approve loans with no credit.The banks want to see that the borrower has the ability to pay something back in a timely manner. And if there is no credit score, but with old unpaid collections, call your friendly bank and check with the underwriter to see if this is a loan they will consider. Compensating factors such as good savings is not considered for “higher ratios”.The ratios are now fixed with no variances for those with no credit scores.
F.H.A.’s charter since the 1930’s has been to help credit challenged, moderate to lower income borrowers purchase homes.Credit had to be good for the past year and H.U.D. states any collections do not have to be paid. Many banks either have a limit on the unpaid collections or will make the borrower pay them at close.Any credit issues will now be considered and credit dings in the past year may knock a borrower out of approval.
Their charter is changing so stay tuned!”
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