This is taken from an email alert sent out by Jennifer Tuttle with Allen Tate Mortgage:
FHA now insures about 30% of all new loans and is nearing the limits of loans they can make based on their capital ratio. In an effort to fix this problem, FHA is going to raise their upfront mortgage insurance premium fees from 1.75% to 2.25%.
This will bring more money into FHA thus meeting their Capital Ratio requirements to continue to lend. They also want to limit the high loan to value financing to borrowers with a 580 credit score; a score under 580 will now require at least a 10% down payment. All of the investors that Allen Tate works with will not purchase a FHA loan with a score below 620 so that change will not affect us. From my conversations with other loan officers in other companies, I don't know of an investor that will go below 620 at this time.
The bottom line... FHA loans, which have been the saving grace for so many folks, are now becoming stricter in their guidelines. This may affect your "borrow-ability"! All the more reason to find a home BEFORE April, when these guidelines take effect. If you have more questions or would like a copy of the new mortgagee letter from FHA, please contact me at Amanda.Shore@allentate.com!!
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