For West Knoxville and Farragut home buyers who plan to use an FHA loan to buy a home, new regulations put into place by the FHA could make securing a loan a little more difficult.
Under the new regulations, potential buyers will be required to have higher minimum credit scores, increased down payments, along with increased mortgage insurance premiums for loans over $625,000. These new policies are expected to go in effect by January 31, 2013.
The new FHA policy changes were made to help increase the FHA reserves, which had deficit of $16.3 billion last month. The tightening of regulations will, hopefully, allow the FHA to avoid a taxpayer bailout this year.
Here is a breakdown of the changes that will go into effect for West Knoxville or Farragut home buyers that plan on using an FHA mortgage to finance their home:
- There will be increased underwriting criteria for buyers with a credit scores ranging between 580 and 620. For those buyers, there will be a maximum debt-to-income ratios.
- For buyers seeking loans between $625,000 and $729,000, there will be increased requirements for down payments and there will be higher mortgage insurance premiums. Down payments will increase from 3.5% to 5%.
- Lenders will no longer be able to advertise that people who have gone through foreclosure will automatically qualify for FHA loans within three years. Those borrowers who have been though foreclosure will have to re-established good credit a provide information documentation of hardship for why they went through foreclosure.
- Finally, there will be a suspension placed on the reverse mortgage program.
Are you considering using an FHA mortgage to buy a West Knoxville or Farragut home? Do you have questions or concerns about the updated changes? If so, please do no hesitate to give Knoxville Home Team a call. Rick can be contacted at 865-696-9002 or send an email to [email protected]. Kati can be contacted at 865-696-1888 or via email at [email protected].