subject: Fha Down Payment Gets Adjusted [print this page] FHA Down Payment Gets Adjusted
In January, FHA made adjustments to the down payment requirements. This change in the FHA down payment requirements threw some borrowers for a loop, while others werent greatly affected by it. Let me explain.
The FHA down payment guidelines, allows home buyers to put as little as 3.5% down, and up to 3% in seller concessions. Prior to the changes the seller was able to contribute up to 6% in seller concessions, so for those who were planning to buy and hadnt started the process yet, had to back off until they could come up with more money.
One other change to the FHA down payment guidelines is that those who have a credit score of a 580 or less, would need to come up with %10 down. This didnt largely affect people, only for the simple fact that those who have a score of 580 probably wouldnt even get an approval from a lender, even though FHA allows it. This was frustrating for those who believed that ultimately they would get the loan, but FHA doesnt necessarily supersede what the lender says. In addition, most families cant come up with 10% down, and this is why many have tried to steer clear from conventional loans. Nobody wants to hear over and over about how they dont qualify, so the entire process can really wear you down, especially without the additional funds to override your score.
The minimum score that someone can have in order to qualify with the 3.5% down, is a 620 score. At one time, this usually meant that you were still okay as long as you had a little bit of money in the bank. Now, this means that you have too many bills even though you might be paying them on time. A 620 score has never been viewed as stellar by anyone, but its better than a 580. The 620 is just enough for the FHA down payment guidelines to allow you that smaller 3.5%.
The new FHA down payment is really just put into place to protect everyone. This requires that you make more of an investment in the home upfront, versus having to try and borrow more than you can afford. Lack of true affordability got us into a mess, and now we need to try and stay out of the mess. It also more of a safeguard for FHA, because with a borrower having payments that are a little lower with a larger down payment, this means that you become less of a risk. This is just the way it goes with FHA, but its meant in the end to bring positive changes to our economy.
A few years ago FHA was only insuring about 2% of all loans. Now in 2010, FHA is insuring 25% of all loans. Trying to keep FHA in a good position while trying to serve the underserved communities can present a challenge. So, its truly all about balance.
For more information or for answer to your FHA questions, you can visit www.fhaloansnow.net.
by: Mayer Dallal
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