Affordable Financial Services Comments On The Recent Changes in FHA Lending Requirements

Jan. 21, 2010 - PRLog -- (Hauppauge, NY) — Commenting on the recent changes in the Federal Housing Administration’s (FHA) lending requirements, Brian Leibowitz, CEO and owner of Affordable Financial Services, said the new changes will prevent first-time homebuyers with poor credit from entering the market.

On January 20, the FHA announced tighter lending requirements on loans insured by them. As per the changes, new borrowers will now require a minimum credit score of 580 to qualify for the 3.5% down payment. Those with a score lower than 580 will need to make a minimum down payment of 10%. The upfront mortgage insurance premium will now increase from 1.75% to 2.25% of the total loan amount. To discourage inflated appraisals, the amount of money that sellers can provide to homebuyers at closing will be reduced from 6% to 3%.

“These changes are an attempt by the FHA to keep its cash reserves above the Congress-mandated levels, which have fallen recently due to rising mortgage defaults,” Mr. Leibowitz said. Currently, the FHA insures 30% of all new loans, a big increase from 3% in 2007. Last year alone, the FHA insured 1.9 million loans.

Earlier, “subprime” borrowers with poor credit scores could get loans at higher rates. But after the financial crisis, banks stopped offering these loans and the same borrowers could get loans from the FHA at a down payment of 3.5% versus the standard 20 percent by paying mortgage insurance premiums to the FHA.

“The new lending requirements will help the FHA reduce lending risk and prevent losses caused by borrowers who default on loans, especially in times of declining home prices and high unemployment. This will help stabilize the housing market in general,” Mr. Leibowitz said. “At the same time, borrowers who fail to qualify elsewhere will be unable to get a loan. This will prevent many first-time homebuyers from entering the market.”
For more information, call 1-888-500-0282 or visit http://www.affordable-financialservices.com/.

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Affordable Financial Services is a mortgage broker located in Long Island, New York, that provides loan process, refinance, home purchase, debt consolidation, and home equity loan services. The company provides clients with the knowledge they need to make the right decisions to move forward with the loan process. With its highly knowledgeable and professional mortgage consultants and processing department, Affordable Financial Services gives clients the best loans to fit their needs. As an industry leader, the company takes pride in its vast knowledge of the mortgage industry and the products it offers to borrowers. For more information, visit http://www.affordable-financialservices.com/.