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Is HUD increasing the FHA down-payment requirements? There are a lot of rumors going around about FHA mortgages, minimum credit scores and higher down-payments so we wanted to clear the air with the FHA Commissioner. In a recent interview, the Federal Housing Administration Commissioner Bob Ryan said, “US regulators should not forget factors like loan to value and credit scores.” Ryan was referring to the new credit score guidelines for the FHA mortgage programs.
FHA made it clear that borrower with low credit scores will be required to have more equity to refinance with FHA. New home buyers who have less than stellar credit scores will have to come up with more money for the down-payments. For example if first time home buyer had a credit score of 580 the underwriter may require a 10% down-payment rather than the 3.5% that most home loans insured by FHA have. Ryan continued, “Higher FHA down-payments will not guarantee timely mortgage payments from the borrower, but we should see less foreclosures and delinquencies because homeowners seem to take their monthly mortgage payments more seriously when they invest more money into their home.” FHA made their goals known at the recent hearing that focused on mortgage risk retention. “This definition has the potential to create false- positive situations,” Ryan told lawmakers.
Groups Petition FHA for More Aggressive Home Loan Guidelines
FHA was given a waiver for the new home loan rules outlined in the Dodd-Frank home finance bill. This mortgage exemption could take the pressure of lenders who are originating FHA mortgages. However, many real estate companies and consumer watch-dog groups contend the new mortgage rules are not fair as it could restrict credit while making homeownership more difficult for many prospective borrowers. In an effort to stimulate the housing market, this group wants finance regulators to reduce the amount of the down payment rather than raise it. Clearly this coalition is at odd with FHA as guidelines continue to tighten for new home buyers. With FHA rates still below 5% on 15 and 30 year loans, the motivation for home buying is strengthened even more. Today the current 30-year FHA mortgage rate is available to qualified borrowers with no points at 4.75%.
Sometimes an assumable loan can be the deciding factor in someone buying your home. As the FHA interest rates rise, the demand for assumable mortgages will rise significantly. FHA continues to be one the last home loan program that offers an assumable mortgage for new home buyers. Conventional mortgages and are not assumable and in most cases, neither are sub-prime loans. In most cases, conforming loans have a clause that requires the mortgage lien to be paid in full before it can be sold. The only home loans that offer an assumable option are the VA and FHA mortgages. Read the original article FHA Assumable Mortgage.