FHA Changes Loan Guidelines: 5% Downpayment Requirement for Low FICO; Mortgage Insurance Bumped from 1.75% to 2.25% of Loan Balance
FHA Loans, with low downpayment and credit score requirements, have tightened their underwriting guidelines:
- Mortgage insurance will be raised from the current 1.75% of loan balance to 2.25% of loan balance
- Downpayment requirements for those with FICO below 580 will be increased from 3.5% of purchase price to 5% of purchase price [note that FICO below 620 is considered 'subprime']
- Allowable seller credit will be reduced from 6% of purchase price to 3% of purchase price
In other FHA news, the agency has now waived a requirement that 90 days pass before "flipped" REO properties are eligible for FHA loans. This will help move the inventory in areas dominated by distressed properties.