Changes to mortgage underwriting standards have made it harder for buyers to get affordable home financing during the past few months, but the new FHA underwriting rules are a necessary evil.
The policy changes are designed to shore up the FHA's capital reserves and help the agency do a better job of managing risk, but the changes mean that many households will have to either spend more to secure financing or scale down what they buy. Among other things, the FHA is:
Raising its upfront mortgage insurance premium to 2.25% from 1.75%
Boosting the minimum down payment to 10% for borrowers with a credit score of 580 and below (it stays at 3.5% for everyone else),
Reducing permissible seller concessions from 6% to 3%
As always, for detailed information about Conventional and FHA underwriting guidelines, talk with a qualified lender. Here's one of the better lenders, knowledgeable and patient: