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Credit scores for FHA loans are changing?


Scottpat
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This Saturday we closed on the refinance of our home loan and I learned something that kind of shocked me from our loan officer and the closing agent.

It seems like the powers to be are lowering the required credit score for an FHA loan from 640 down to 560 in an attempt to generate home sales and loans. This little bit of news came from Wells Fargo, and our loan person even showed me a copy of the memorandum that they just received. The interest rate is going to be higher and the down payment will be a little higher. The launch date for this program is Jan 18 with Wells Fargo.

Isn't this how we got into this mess to start with!

Has anyone heard anything about this??

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It's nothing to worry about Scott, the POS's those buyers will be looking at won't appraise high enough to close the loans. Check this out, clipped from http://www.bigbuilderonline.com/post.as ... D110114002

Speaking of mortgages, credit constraints continue to be a big topic of discussion among home builders big and small at the show. Not only are lenders raising underwriting standards and requiring near-ridiculous amounts and types of documentation, but appraisals are still causing a lot of problems despite some regulatory changes aimed to improve the quality of appraisals. Builders are actually providing appraisers with pre-prepared comp packets, chock-full of all the information on four, five, sometimes six comps in the community.id="blue">

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It's nothing to worry about Scott, the POS's those buyers will be looking at won't appraise high enough to close the loans. Check this out, clipped from http://www.bigbuilderonline.com/post.as ... id=586984§ionID=1939&cid=NWBD110114002

Must be a regional thing. Lotsa folks around here with FHA loans live in real nice homes.

Marc

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Hmm.. As far as how we got in this mess - I wonder.

I've always thought the intent of FHA was to assist first time home buyers in getting their feet wet. Sometimes, I wonder if the process continues to serve that interest.

Around here well over half the foreclosures I see are big homes, which clearly attests to other practices that were running wild like: Stated income applications; 80/20 loans (100% of value); loans for 125% of the value of the home, ARMs (which I've always thought was flat out insane), etc. (Now, the second one, I pulled off myself, but I fully understanding the consequences and got it converted quickly with an end result of an almost instant 25K equity.)

I think the REAL problem was that there were so many lender's reps comfortable throwing out loan tactics that were meant for savvy high rollers that clearly understand what the they're doing - GAMBLING. Unfortunately, thanks to a lot of wheelin' dealin' lenders, many poor folks didn't grasp the fact that they were gambling in a great big financial game of musical chairs, and they finally found themself chairless.

It's all water under the bridge now, and most of those tricky investment options are GONE even to those who could actually use them to proper advantage. As usual, the bad apples have spoiled the entire barrel.

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It's not the FHA loan that's the problem, it's the sub 600 credit score that equals POS. Given our current economic position those fiscal delinquents should be cash only, and with appraisers reluctant to push too hard on values they will remain so. That was my point, for the foreseeable future it's a nonstarter.

Tom, I agree...!

A couple of weeks ago I inspected a $380,000 home that was going FHA! Lower down payment and lower interest rate is why they did it, or so I was told.

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It's not the FHA loan that's the problem, it's the sub 600 credit score that equals POS. Given our current economic position those fiscal delinquents should be cash only, and with appraisers reluctant to push too hard on values they will remain so. That was my point, for the foreseeable future it's a nonstarter.

Tom, I agree...!

A couple of weeks ago I inspected a $380,000 home that was going FHA! Lower down payment and lower interest rate is why they did it, or so I was told.

And, that's the part I don't get about FHA. If a "first time home buyer" can afford a $380 K home, why do they need special considerations or help? I just don't get it...

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It's not the FHA loan that's the problem, it's the sub 600 credit score that equals POS. Given our current economic position those fiscal delinquents should be cash only, and with appraisers reluctant to push too hard on values they will remain so. That was my point, for the foreseeable future it's a nonstarter.

Tom, I agree...!

A couple of weeks ago I inspected a $380,000 home that was going FHA! Lower down payment and lower interest rate is why they did it, or so I was told.

And, that's the part I don't get about FHA. If a "first time home buyer" can afford a $380 K home, why do they need special considerations or help? I just don't get it...

They were not first time home buyers, they just did not have the money(5%) to put down for a conventional loan and then the three months of reserves(3 months of house payments in savings or in the bank) that they require you to have. FHA requirements are much more relaxed.

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It's not the FHA loan that's the problem, it's the sub 600 credit score that equals POS. Given our current economic position those fiscal delinquents should be cash only, and with appraisers reluctant to push too hard on values they will remain so. That was my point, for the foreseeable future it's a nonstarter.

Tom, I agree...!

A couple of weeks ago I inspected a $380,000 home that was going FHA! Lower down payment and lower interest rate is why they did it, or so I was told.

And, that's the part I don't get about FHA. If a "first time home buyer" can afford a $380 K home, why do they need special considerations or help? I just don't get it...

They were not first time home buyers, they just did not have the money(5%) to put down for a conventional loan and then the three months of reserves(3 months of house payments in savings or in the bank) that they require you to have. FHA requirements are much more relaxed.

Got it. So, FHA isn't just about first time home buyers anymore. I remember when I got an FHA loan on my first house, I could transfer the loan, but I couldn't get another FHA loan. Things apparently have changed?

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