How Will Changes in FHA Mortgage Loans Rules Affect You?

Applying for a Mortgage

Change in undoubtedly inevitable and you need to be prepared to face any change that comes your way. According to the U.S. Department of Housing and Urban Development, Federal Housing Administration makes a purchase of about thirty percent of the residential market. Clearly, the agency has been a rescue tower for many individuals seeking various medical professional mortgages. However, the agency has recently set new rules that are likely to impact your wallet.

So, What are These Changes?

Credit Score Requirement

Originally, there were no rules governing the minimum credit score requirement. Financial lenders had the freedom to come up with a minimum score and set it as a standard. Nevertheless, with the new rules, to qualify for a mortgage loan, you need at least a FICO score of 500. Borrowers with a higher FICO score used to make a down payment of 3.5 %, but the rate has gone up to 10%. This in turn implies that lenders are likely to raise the bar in their borrowing standards.

Insurance Premium Payment

As mentioned above, borrowers should pay a 3.5 percent down payment for a mortgage loan. The borrower should then make an upfront insurance premium of 2.25% at closing. With the new rules, the one-time premium payment reduces to one percent but the down payment remains the same.

Bad Credit?

Lenders use a set-up format to evaluate the credibility of potential borrowers. ‘Risky’ borrowers can also become good loan candidates considering other factors. For example, lenders such as MediPro Capital Finance offer medical mortgages for professionals, although they are credit unworthy in the present day. Julie Flatland, the vice president of credit in the mortgage lending division of Carrington Mortgage Services states that if you have filed for bankruptcy, you can apply for a conventional loan in four years or for an FHA or a VA loan in two years.

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The changes in loan rules and underwriting standards might scare you away from borrowing as well as affect the lenders willingness to offer loans. However, these changes are here to stay and you should adjust accordingly.