How Are FHA Home Lenders Regulated?
The Federal Housing Administration or FHA operates a home loan guarantee program under which mortgage companies are encouraged to lend to even those people who have low credit scores. These mortgage companies are authorized as FHA home lenders to sanction home loans to a wider section of people, especially first time buyers. These lenders have to follow certain rules and regulations set forth by the FHA before they sanction the loans. According to FHAmortgagemag.com, the FHA's mortgage review board has recently taken strict action against 240 lenders who violated numerous lending regulations and failed to meet the FHA requirements. Actions taken by the FHA MRB included suspensions, reprimands, probations, money penalties and withdrawal of FHA lending approval.
Regulation of FHA Home Lenders
FHA home lenders are given a set of rules and regulations that need to be adhered to while sanctioning FHA home loans. The FHA does not do the actual lending but insures and backs the mortgages and refinance loans given by authorized lenders. These requirements relate to the upfront fees payable by a borrower, the percentage of down payment, and the minimum credit score that a borrower should have. Recent years have witnessed several FHA home lenders flouting the set norms and sanctioning loans to even non eligible people, resulting in a greater number of foreclosures and a crisis in the US housing industry. Consequently, the FHA has taken a tough stance and modified its guidelines for the FHA home lenders.
* The FHA has raised its upfront mortgage insurance premium from 1.7% of the loan to 2.25%. Home buyers pay insurance charges either through a one-time upfront premium or through monthly insurance premiums.
* The FHA also intends to raise the rate of annual premiums.
* The FHA home lenders can sanction home loans with a 3.5% down payment requirement to only those buyers who have a minimum credit score of 580. Borrowers with a credit score of lower than 580 will need to make a minimum down payment of 10%.
* The seller concessions now stand reduced from 6% to 3%. This means that sellers cannot help buyers with the down payments. Instead, they can reduce the selling price to allow for the coverage of closing costs and expenses for upgrades.
It is the responsibility of the FHA home lenders to check whether a borrower meets all the requirements outlined by the FHA. These include a borrower's:
* Credit score
* Trade lines on his credit
* Work history and steady stream of income
* Assets and Reserves
* Home down payment ability
The best way to locate FHA home lenders is to approach a mortgage broker who will have the list of various authorized lenders.
Regulation of FHA Home Lenders
FHA home lenders are given a set of rules and regulations that need to be adhered to while sanctioning FHA home loans. The FHA does not do the actual lending but insures and backs the mortgages and refinance loans given by authorized lenders. These requirements relate to the upfront fees payable by a borrower, the percentage of down payment, and the minimum credit score that a borrower should have. Recent years have witnessed several FHA home lenders flouting the set norms and sanctioning loans to even non eligible people, resulting in a greater number of foreclosures and a crisis in the US housing industry. Consequently, the FHA has taken a tough stance and modified its guidelines for the FHA home lenders.
* The FHA has raised its upfront mortgage insurance premium from 1.7% of the loan to 2.25%. Home buyers pay insurance charges either through a one-time upfront premium or through monthly insurance premiums.
* The FHA also intends to raise the rate of annual premiums.
* The FHA home lenders can sanction home loans with a 3.5% down payment requirement to only those buyers who have a minimum credit score of 580. Borrowers with a credit score of lower than 580 will need to make a minimum down payment of 10%.
* The seller concessions now stand reduced from 6% to 3%. This means that sellers cannot help buyers with the down payments. Instead, they can reduce the selling price to allow for the coverage of closing costs and expenses for upgrades.
It is the responsibility of the FHA home lenders to check whether a borrower meets all the requirements outlined by the FHA. These include a borrower's:
* Credit score
* Trade lines on his credit
* Work history and steady stream of income
* Assets and Reserves
* Home down payment ability
The best way to locate FHA home lenders is to approach a mortgage broker who will have the list of various authorized lenders.
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