Yet another round of changes are on the horizon for would-be FHA buyers. Currently, FHA requires a minimum down-payment of 3.5% on loans up to $729,750. It’s the easiest loan to qualify for both in terms of credit score, credit history, and cash on hand to buy. That may soon change. Here are some of the proposed changes to future FHA loans:
1. Minimum credit score of 620 for debt-to-income ratios above 43%. If your credit score is under 620, you’ll need to explain why.
2. Raising the down-payment minimum to 5% on loans over $625,500. Mortgage insurance premiums of 1.55% annually.
3. Mortgage insurance will be on the life of the loan and can never be cancelled.
4. If you’ve had a foreclosure in your history, you can have access to an FHA loan after 3 years IF and ONLY IF you’ve reestablished your credit, can fully qualify with a loan application, and explain why the foreclosure occurred (to look for a chance of it happening again).
If you’re thinking of using an FHA loan to buy in 2013, I HIGHLY recommend you step up your efforts immediately. There are other options for many buyers that you may want to explore. I’m happy to talk those over with you, but your best bet is to consult a local lender. Email me for the names of some great ones.