Lower Loan Limits: The FHA loan limits are significantly higher than Fannie Mae and Freddie Mac conforming loan limits. Currently, the standard conforming loan limits are $625, 500, while the FHA's loan limits are $729, 000. Donovan came out in favor of lowering loan limits, however he indicated that this will require Congressional action. According to an FHA announcement of December 12, 2012, the 2013 maximum loan limits are not changing. Post-Foreclosure Requirements: The FHA has less stringent past-foreclosure requirements, allowing a borrower who experienced a foreclosure to qualify for an FHA loan after a 3-year waiting period, versus Fannie Mae and Freddie Mac's 4-7 year waiting period. Once again, while there is pressure to establish stricter credit requirements, the FHA is not committing itself to these changes. Donovan believes that there needs to be opportunities for those hit by the economic crisis, including borrowers who may have had a foreclosure. FHA Loans: New Loan Requirements and Fees?
The FHA continues to struggle with losses, especially those relating to their single-family mortgage loan programs. According to an independent audit, the FHA is running a negative capital reserve of $16. 3 billion. If the FHA does not take aggressive corrective actions, it may need to draw upon treasury funds (a bailout by taxpayers) in order to meet their financial obligations. How the FHA's Financial Problems Affect You Due to the seriousness of their problem, the FHA is planning to make a number of changes in their mortgage programs, including: Raising mortgage insurance premiums Raising minimum credit score Lowering loan limits Terminating the cancellation of Mortgage Insurance Premiums Secretary of HUD (Housing and Urban Development), Shaun Donovan, presented to the Sen. Banking Committee testimony, on December 6, 2012, regarding the FHA's financial position and plans for the upcoming year. The FHA has yet to announce firm changes in their program, however HUD Secretary Shaun Donovan indicated that some of these changes will commence in 2013.
If you have no credit history, filed for bankruptcy, have a history of late payments, been foreclosed on, or sent to debt collections, it will be harder to get approved for a loan.
Sec. Donovan indicated in his testimony that he is concerned about the possibility of a bailout; however, the FHA is planning on increasing its revenue and cutting its loss through new loan requirements and other administrative actions. He hopes that the FHA can avoid tapping into the treasury. A strong housing market recovers will help restore the FHA's balance sheet (due to appreciation of housing prices). Donovan is taking steps to balance between helping weaker sectors of the economy receive mortgage loans and purchase homes without hurting the FHA's precarious financial situation and at the same time ensure that the housing market recovers. FHA: Steps to Avoid a Bailout — A Look Back at 2012 Here are some of the steps that the FHA has taken to increase its revenues or cut its losses: Increased supervision over lender network: This includes better supervision over lenders' compliance with underwriting and service requirements. The National Mortgage Settlement, which targeted big lenders for their poor foreclosure activities, brought in $1 billion of income.
When it comes time to finance the purchase of your new home, picking the right loan product can make it easier to get qualified and save you a significant amount of money over the course of the loan term. Prior to the financial crash that led to the recession, borrowers had a bewildering range of choices when it came to mortgage financing. That's not as true today, but it still makes sense to choose from the limited selection wisely. Prior to 2007, all of the major banks, insurance companies and other corporations with money to lend had their own brands of home loans for sale to home buyers. These loans were sold by banks and mortgage brokers on behalf of these investors, who ultimately funded the loans so people could buy homes. Not all of those products served borrowers the way they had hoped. After the Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, was signed into law in 2010, most of those products disappeared. Today, consumers have access to fewer financing tools from a far more limited set of investors, but they each have their differences.