What new FHA mortgage guidelines will mean to you
In a phrase, you'll have ... more skin in the game.
Borrowers have been flocking to FHA mortgages for the past several years as the best and only way to finance the purchase of a home. Low down payments and lower credit scores have allowed more people to qualify for a loan.
But that has been and will be changing even more as the FHA tightens its standards.
The FHA will be increasing the up-front cash that a borrower has to bring to the closing table in an FHA backed loan in various ways. The maximum seller concession will be reduced from the current 6% to the more common industry standard of 3%. Closing costs will no longer be allowed to be rolled over into the loan and financed. The minimum credit score to qualify will be 620 rather than the far too low 500 FICO score previously.
The up-front mortgage insurance premium may be raised and the annual mortgage insurance premium may be increased as well. And there is talk that the minimum down payment will be increased from the current 3.5% to 5%.
The bottom line, a few less people may be able to qualify but those who do will be more responsible borrowers.
And that's not a bad thing after all.
Read more from the Washington Post.