This summer the Federal Housing Administration is going to be changing a few things in regards to FHA home loans, which are currently the most popular type of home loans for Logan Real Estate purchases.
One of the things that will change is in regards to credit scores required to purchase a home. The FHA will allow home buyers with poor credit scores, fico’s below 580, to get mortgage loans, but it will require more skin in the game.
The current down payment requirement for all FHA loans is 3.5%. Starting this summer, those with FICO scores less than 580 will be required to put 10% down. These borrowers are riskier, and being required to put more money down is a great way to reduce the risk of foreclosure.
One other change that will happen will be with the rate of mortgage insurance. Mortgage Insurance is required for borrowers with less than 20% equity. It is essentially foreclosure insurance, and is used to cover the bank for costs associated with foreclosures. The upfront rate will rise half a percentage point from 1.75 to 2.25% of the loan amount. This will be in effect for all FHA borrowers, not just those with bad credit. Essentially, this increased mortgage insurance will increase closing costs and make getting home loans more expensive.
The FHA is making moves to reduce their risk. If you are planning on purchasing a Logan Home using FHA financing, this is another reason to act quickly if you want to save some money. Click here to search Logan Real Estate now.