The FHA monkey wrench
Generally speaking, the real estate industry is cautiously optimistic that we're presently at the beginning of a market recovery. The signs of this recovery are primarily manifesting themselves in the entry-level sector of the market. This is to be expected, as real estate markets tend to recover from the bottom up; today this is largely an FHA-loan fueled recovery. So why then is the FHA looking to throw a monkey wrench in to the works?
I'm quite weary of the proposed changes to FHA loans for 2010. Here are just a few:
•· Minimum credit score of 640; it is now 620
•· Lowering the maximum debt to income ratio to 50%, today the ratio is higher
•· Increasing the down-payment requirement from 3.5 to 5%
•· Risk-based pricing: higher rates for riskier borrowers, fewer will qualify
•· New minimum net worth requirements for FHA lenders-smaller lenders will not qualify so there will be less competition and ultimately less choice for the consumer
On the bright side, these are just proposed changes for now. And like any legislation, it will be disputed, negotiated, altered, and tweaked. However, if you suspect that your personal situation puts you right near the fault line of any of these changes, I'd run out and have a chat with your lender...