New FHA Requirements in Effect This Week

Some new regulations went into effect this week that you should be aware of if you are looking for an FHA approved Loan, and considering that The Federal Housing Administration is involved in 70% of all U.S. home loans these days,   that pretty much covers just about everyone. As of October 4, 2011, you must have a minimum credit score of 580 to qualify for maximum financing, If your credit score is between 500 to 579 you can receive no more than 90%  Loan to Value( LTV). People with scores under 500 are no longer eligible for FHA financing. The upfront mortgage insurance premium charged on FHA loans has been lowered from 2.25% to 1%. On a $250k loan that would mean an upfront savings of about $3,000, but be advised that the monthly premiums will be higher. Even still, FHA monthly mortgage insurance premiums are still less than conventional PMI payments. In light of these new FHA guidelines, a recent report released by Zillow shows that home ownership may be out of reach for many Americans. The study found that due to their credit scores, 3 out of 10 home buyers are most likely unqualified for a mortgage. The report shows 4 about 47 % of Americans have scores in the 700 range, and 29 % fall into the category of poor credit with scores at 620 or below. This Week's Real Estate Insight: Improving your credit score is well worth it if you are in the market for a mortgage. On a 30 year $300,000 mortgage at today's rates, a person with a credit score in the high 700's will save over $100,000 in interest over a person with a rate in the high 600's. €