FHA Loans On The Brink
FHA home loans are great if you can get one – but getting one is now the problem. It appears that many lenders have raised the bar on qualifying for these loans, given the instability of the government that backs them.
An FHA loan, or Federal Housing Administration loan, is a loan that is backed by the federal government. It allows people to buy homes who might not otherwise be able to with lower credit scores and lower down payments. But lenders do not seem to want buyers to go as low as they could previously go.
Current FHA requirements for these loans are a minimum credit score of 580 and a down payment of 3.5%. However, many lenders have raised that minimum to 660 to qualify, and some are charging up to 10% more in borrowing costs.
Why? Well, if you were a lender, wouldn’t you want to put extra protection in place when unemployment numbers hit record highs and the entire economy that we rely upon is frozen in place? These extra precautions will apply to all loans, but especially FHA loans are given that these borrowers are going to be the riskiest.
Also, the federal government just approved a $2 trillion stimulus package. If the very organization that backs your loans is doling out money to the entire country, how confident can you be that they will also make good on securing your loan when nothing is for sure anymore? This is all a matter of security or lack thereof.
It seems the lending industry did learn a lesson or two from the 2008 collapse, and even though it means instability, it could also mean a lack of stupidity. And that is one thing we can be grateful for if nothing else.