By Michele Lerner
Mortgage Credit Problems Columnist

The Federal Housing Administration (FHA) changed some of the FHA loan requirements in January 2010 in an effort to strengthen the financial reserves of the agency. Government-insured FHA home loans have become an important product for borrowers with less than stellar credit. In 2007, just 3% of mortgage applications were for an FHA home loan, but in 2009 FHA home loans represented more than 30% of all new mortgages.

 

New FHA Loan Requirements

• Borrowers need a minimum credit score of 580 to qualify for a loan with a down payment of 3.5%.
• Borrowers with a credit score below 580 need to make a down payment of at least 10%.
• Seller concessions, which include buying down the interest rate on the loan or paying closing costs, are limited to 3% of the sale price of the home, down from 6%.
• Buyers need to pay an upfront mortgage insurance premium of 2.25% of the total loan amount, up from 1.75%. For example, a $150,000 mortgage would require a mortgage insurance premium of $3,375. Most borrowers wrap this premium into the mortgage.

These new FHA loan requirements are anticipated to be in place in spring or summer of 2010.

Options for Consumers Needing Poor Credit Home Loans

Home buyers and homeowners who want to refinance should start by completing the form on this page to find the lowest mortgage rates from bad credit mortgage lenders.

Potential home buyers with poor credit should start the home purchase process by checking their credit report and looking for ways to boost their credit score by paying down some debt and paying all bills on time.

Home buyers looking for bad credit loans may need to accumulate more cash before they can qualify for a poor credit home loan. A bigger down payment can go a long way toward convincing a lender to approve you for a laon.

Another option for home buyers with low credit scores is to pay a slightly higher interest rate. With today's low mortgage rates, even a bad credit mortgage can have a low interest rate, which makes home ownership affordable.

To find the lowest mortgage rates available to you, complete the form on this Web site and start comparing offers from mortgage lenders.

Sources

http://www.usatoday.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