Juicy Estates: Mortgage Blog

3 Alarming Facts About FHA

Fact: since 2005 FHA’s share of the mortgage market has increased by almost 1000%

Fact: the FHA loan default rate has more than tripled soaring to 7.8%.

Fact: Federal law states that FHA’s reserves, after expected losses, must be greater than 2% of the loans it insures. This ratio has decreased dramatically currently standing at 3% down from 6.4% in 2007.

The writing may be on the wall for FHA.  While a Federal bailout of the program may not be necessary we will definitely continue to see lenders tighten underwriting guidelines for those who hope to take advantage of the program.

Some of the recent changes in FHA requirements are the minimum of a 640 credit score (some lenders require 660) and debt to income ratios not exceeding 50% (some lenders have a ceiling of 42%).

FHA financing with just a 3.5% down payment was one of the primary ingredients in the recipe for the housing recovery and as the program becomes more restrictive more and more potential buyers may be squeezed out of participating in the dream of home ownership

This entry was posted on Wednesday, September 9th, 2009 at 7:05 am and is filed under Home. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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