By Barbara Marquand
Mortgage Credit Problems Columnist

FHA home loan requirements are toughening up. Although the details haven't been worked out, FHA officials plan to raise the credit score as well as the down payment requirement for the mortgages the Federal Housing Administration guarantees.

If you're already struggling with qualifying for a bad credit mortgage, this is probably not welcome news. But the earlier you get started to prepare to meet the requirements, the better.

FHA Loan Rates

Currently the FHA loan down payment requirement is only 3.5%, and because of the federal government's loan guarantee, lenders are more willing to look at applicants with less-than-perfect credit than they might for conventional mortgages. In addition, FHA loan rates are competitive--see for yourself by entering your information in the form on this page to get free quotes from lenders.

But concern is mounting over FHA's loan portfolio, and federal lawmakers are calling for changes.

U.S. Housing and Urban Development Secretary Shaun Donovan said his department intends to raise the credit score and down payment levels required for home loans, but he hasn't said by how much. Some Congress members have proposed a 5% down payment level. Federal officials are also talking about limiting the amount of closing cost help sellers can provide and raising the mortgage insurance premium buyers pay.

Meeting New FHA Loan Requirements

So what can you do?

• Sock away as much money as you can so you can meet the down payment requirement when you're ready to buy. Besides helping you qualify for an FHA loan, a higher down payment will decrease how much you have to borrow, making your monthly mortgage payments more affordable.
• Check your credit score. You can get copies of your credit reports and purchase a credit score from Annualcreditreport.com. Make sure there are no errors on the reports, and if you find mistakes, contact the credit bureaus and creditors to fix them. Sometimes fixing just one error is enough to increase your score and get improved access to credit.

Reduce Credit Card Debt

• Work on improving your credit score. Pay down your credit card debt as much as possible, catch up on your bills, and make payments on time. You won't get overnight results--improving your score takes some months' time. But responsible bill paying and use of credit--like diet and exercise for weight loss--are the only real ways to improve your score.

Although tougher requirements might add challenges to getting an FHA loan, you'll be better off in the long run when you achieve a higher credit score and accumulate a better down payment.

Sources

http://https://www.annualcreditreport.com / http://www.upi.com

Other Recommended FHA Loans Articles

• Purchase and remodel with an FHA 203(k) loan
• FHA loan changes affecting poor-credit borrowers
• FHA refinancing and underwater homeowners