New FHA Rules

You are probably wondering what is new in the housing world? Well, for anyone who is trying to buy a home or wants to buy a home, you should be aware of the new loan requirements! Don’t worry it’s nothing too drastic.

FHA is about to make it more difficult to borrow money to buy a home. On April 1^st, Uncle Sam will begin to crack down his whip on unqualified borrowers. FHA will no longer loan money to borrowers with debts of $1,000 or more. This new rule even pertains to borrowers with perfect credit scores. They also can be denied a loan if they are in debt $1,000 or more.

Before this, borrowers, who were in disputes with creditors over debts, could still be approved for a loan based on their prior credit history. With this new policy in place, lenders will have to justify to FHA why they are granting a loan to a particular person. They will have to prove to FHA that the loan was given to a qualified person based on proper documentation.

FHA does give the borrower a chance to show that they are worthy of a loan. The quote on quote risky borrower has the right to prove that the debt is paid off or in the process of being paid off. The borrower can also explain why the disputed loan is somehow wrong.

The agency is doing this in an effort to reduce its risk. It is all in an effort to improve their depleted reserve fund. Furthermore, FHA plans to charge more for insurance premiums.

I believe these new requirements to homeownership are good for potential homebuyers. It is a way to protect potential homeowners from buying a home that they cannot afford later on. It stops them from getting a loan that they ultimately will not be able to pay back. Denying unqualified borrowers loans will ultimately reduce the risk for FHA. Because of the devastation that the housing burst created for millions of homeowners, FHA must now be more cautious with whom they pass out loans to.

However, this new policy could slow down the housing market recovery even more. If fewer and fewer borrowers can secure FHA mortgages, then more and more people will not invest in the housing market. These loans are one of the few options available to homebuyers needing low down payment mortgages. It could potentially keep a lot of people out of the housing market.

Overall, I think this is positive news. Potential homeowners might not like that there are more barriers to entry, but it will help everyone in the long run. It could affect the housing market in the short run, but it is better if FHA grants loans to qualified homebuyers. It will hopefully prevent another housing bubble to form.

It is a little disheartening that FHA just made this new policy. You think this requirement would have been the status quo from the very beginning.