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Planning for a Bright, Financial Future

When I married my husband, I was impressed at how financially prosperous he was. While he didn’t attend college, he landed his dream job with a successful railroad. At a young age, my spouse invested heavily in railroad stock. He also started contributing to an Individual Retirement Account, more commonly referred to as an IRA. Have you recently begun working full-time for the first time in your life? Consider planning for a bright, financial future by starting an IRA. Depending on your personal preferences, a traditional, a non-deductible, or a Roth IRA might work best for you. On this blog, I hope you will discover the benefits of consulting with a financial adviser before starting your first IRA.

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Planning for a Bright, Financial Future

What Do The Upcoming Changes To FHA Loans Mean To You?

3 December 2014
 Categories: Finance & Money, Blog

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The Federal Housing Administration (FHA) has provided government backing for mortgages and other home loans for nearly a century. During this time, the regulations governing mortgages have changed dramatically -- and new changes continue to come. Although many such changes are designed to help protect consumers, they sometimes have unanticipated consequences. Read on to learn about several upcoming changes to how FHA loans are disbursed and processed, as well as what these changes may mean to the new home buyer.

What is an FHA loan?

Although loans obtained through the FHA are often referred to as "FHA loans," the FHA itself does not lend money. Instead, it helps provide an assurance to private lenders that if a homeowner defaults on his or her loan, the government will make up the difference. To apply for an FHA loan, you will fill out a lengthy application on the FHA website -- if your application is approved, the FHA will help find a private lender that fits your criteria.

What are some upcoming changes to FHA lending practices?

The utilization of FHA loans has skyrocketed since the economic crisis, rising from only 3 percent in 2006 to more than 30 percent in 2014. This rapid increase has necessitated stricter lending standards to help protect FHA funds (and taxpayer funds) from being exhausted by default mortgages. The FHA hopes that by tightening its criteria, it can help minimize the number of guaranteed loans that enter default.

Below are three specific changes that may affect the first-time home purchaser:

  • Increase in minimum credit score
    • In past years, FHA loans have been one of the only types of loans that homeowners with poor credit can obtain.
    • Now, FHA will impose a minimum credit score of 500 to apply for and receive an FHA-guaranteed loan.
    • Applicants with credit scores between 500 and 580 will be required to pay a higher down payment than applicants with credit scores above 580.
  • More thorough review and documentation requirements
    • If your credit score is below 620, you can expect to not only possibly pay a higher down payment, but be required to submit more documentation (and wait longer for review) than applicants with higher credit scores.
  • Limits on refinancing
    • If you already have a non-FHA loan, but your home is worth less than you paid, you were previously permitted to refinance into an FHA loan -- often reducing the amount owed to your home's current value.
    • Now, this type of refinance will be permitted only in specific situations, and only for first mortgages.

(For more information on home loans, contact a company such as http://www.firstmortgagecompany.net)