Tucson, AZ - FHA Home Loans are today's new subprime loans... We've been hearing this in the business since roughly August of '07 when the mortgage meltdown began to hit. I hear loan originators all the time comparing FHA lending to subprime lending; and based on credit scores some subprime loans should fly through FHA.
In reality, FHA mortgage lending has always been there for the buyer with a questionable credit PAST.
The subprime design was for the buyer who has had poor credit, still has poor credit and the profile indicates that borrower will more than likely continue to have poor credit. And the loans were priced accordingly.
An interesting thing about FHA mortgage lending is that underwriters as well as lenders are held responsible for the loans they make. And as you can imagine there have been droves of originators flocking to put subprime borrowers into FHA mortgage loans. But there's been one problem...some of those originators have not taken the time to educate themselves about the FHA product. Loans are getting submitted without cover letters, proper FHA documentation, credit letters, etc. So what happens is the loan quality diminishes and because the lenders and underwriters are held responsible we are benining to see a trend of credit score requirements among FHA lenders where there was no requirement in the past.
So what has typically been available for buyers with no credit or even low 500 scores is trending toward that 550 to 580 middle credit score range and potentially higher.
You see, FHA loans are great for the borrower with prior credit issues that can be explained and documented; the borrower who is willing to learn about credit and has taken the proper steps to ensure that the credit issues of the past are just that...the past.
So in the end, FHA mortgage lending is a tremendous resource for the first time home buyer, even with spotty credit. But it is very important that as an FHA originator we educate the buyer about credit and properly document any prior credit dings. Because we NEED to be convinced that the borrower WILL make the payments.
For more information on FHA mortgage loans in Tucson go to my website at http://tucson-fha-loans.com
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