FHA Loan Requirements About to Get Tighter

FHA Loan Requirements About to Get Tighter The Federal Housing Administration (FHA) isn't broke, but its monetary reserves aren't quite where they're supposed to be either.FHA's capital reserves are supposed to be at least 2 percent of outstanding mortgage loans. According to the actuarial review for fiscal year 2009, the reserves are a mere 0.5 percent. By the time you read this, FHA's capital reserve requirements might have disappeared entirely, thanks to the increasing number of FHA foreclosures and banks going south.All FHA mortgage applicants pay a mortgage insurance premium. These FHA insurance premiums go into the FHA's capital reserves fund and are used to pay for loans that are foreclosed upon. As FHA home loans have become more and more popular since the subprime crash, and  unemployment numbers have  skyrocketed, more of these FHA home  loans have gone bad, requiring more payments from the capital reserves.  Other FHA loan Advantages Include: Minimal Down Payme
nt and Closing Costs. Down payment less than 3.5% of Sales Price Gift for down payment and closing costs allowed. No reserves or required. FHA regulated closing costs. Seller can credit up to 6% of sales price towards buyers costs. Easier Credit Qualifying Guidelines such as: Minimum FICO credit score of 540. FHA will allow a home purchase 2 years after a Bankruptcy. FHA will allow a home purchase  3 years after a Foreclosure.  Easier Debt Ratio & Job Requirement Guidelines such as: Higher Debt Ratio's than other home loan programs. Less than two years on the job is allowed. Self-Employed individuals o.k. APPLY NOW AT www.FHAmortgageFHALoan.com Unlike the Federal Deposit Insurance Corporation (FDIC), which recently proposed that banks pay three years of insurance premiums at once in order to replenish the FDIC's reserves, FHA can't require current FHA Mortgage borrowers to pay more. But it can change the rules going forward that will make it more difficult
to qualify for an FHA insured home loan.According to a senior officials at the Department of Housing and Urban Development (HUD), conversations are ongoing to determine what will make the most sense for and prolong the stability of the FHA Mortgage program.."Nothing will be taken off table," the official said. "Everything needs to be assessed through the lens of the FHA core mission as well as the broad economic policies of the Administration with regard to stabilizing  the housing market."There are at least six different ways FHA/HUD is looking at stabilizing FHA:1. Increasing the minimum required down payment. FHA is looking at whether increasing the required minimum down payment from 3.5 percent to 5 percent (or more) will help stabilize defaults. If FHA mortgage applicants have more "skin in the game," FHA officials wonder, will they be less likely to default on their FHA mortgage loans?2. Changing the FHA mortgage insurance premiums. HUD officials are considering whether ch
anging the way FHA mortgage insurance premiums are structured will keep more FHA Mortgage applicants from becoming delinquent. Should there be an extra fee up front? Should the FHA insurance premiums amount paid over time change for maximum stabilization? (FHA mortgage applicants  currently pay an upfront fee and a monthly charge for mortgage insurance.)3. Raising the minimum credit score required for an FHA mortgage loan. While credit scores have been lousy at predicting what happens to people with good credit who lose their jobs, they have been more accurate in identifying risky behavior. At the height of the housing boom, FHA mortgage loans  approved FHA mortgage applicants with credit scores below 500. Discussions underway wonder whether the minimum acceptable credit score should be 620 or higher.4. Dialing back how much money sellers can give FHA buyers. Right now under FHA loan guidelines the  sellers can give buyers up to 6 percent to help cover closing costs and fee
s. Experts recommend reducing that to 3 percent.5. Requiring FHA mortgage lenders to have more cash on hand. Like borrowers, FHA lenders need to have more "skin in the game." Right now, FHA lenders need only have $250,000 in cash to cover fraud-related loan originations, but FHA loan officials want to see that amount rise to $2.5 million. That will reduce the number of FHA Mortgagee lenders that can offer FHA loans, and hopefully cut down on mortgage fraud.6. Eliminating abusive FHA lenders. HUD is asking Congress for more power to prevent abusive lenders from making FHA loans. According to HUD Secretary Shaun Donovan's testimony before the House Financial Services Subcommittee on Oversight and Investigations, FHA mortgage lenders will be required to "indemnify the FHA fund for their own failures to meet FHA requirements" and will be held accountable nationally for any improper activities. Donovan said that HUD "will also develop a FHA mortgage Lender Scorecard that will summarize t
he performance of lenders who do business with the FHA. This scorecard will be posted on (the department's) Web site to ensure transparency and accountability for FHA lenders, borrowers and the market."FHA officials say the quality of the FHA mortgage portfolio has improved over the course of 2009. The typical FHA Mortgage applicants  debt-to-income ratio has declined, meaning the FHA mortgage payment is a smaller portion of the borrower's monthly income.While HUD officials are pleased to see borrowers with a stronger personal finance balance sheet, there are two big concerns. First, the number of borrowers who are delinquent in paying their mortgages is growing. If those borrowers don't figure out a way to make up their missing payments and start paying their FHA mortgage on time, more homes will fall into foreclosure, further depressing housing prices.The second concern is rising unemployment. "If unemployment continues to track at high levels and goes to 11 or 12 percent, that
's a real struggle," the senior HUD official said. "The big risk is a stagnant, slow recovery that keeps unemployment rates high because there is no loss mitigation technique for that."In other words, if FHA Mortgage applicants lose their jobs and can't find replacements that pay enough to cover their monthly expenses, the FHA's capital reserves fund sinking into the red will be the least of the government's problems.

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