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I’ve been receiving a lot of good information from experienced lenders that I trust.  Everyone really needs to be aware of some drastic changes that will be occurring in 2008.  The sub-prime lending mess, declining real estate market and foreclosures in the past few years has finally starting to “trickle down” and will affect almost all potential home buyers.   In 2008 you will see a lot of changes to underwriting guidelines.  The good news is that FHA loans will be less affected than conventional loans.  The demand for FHA loans will probably increase in 2008.  The guidelines will be more strict.  For example:

*Conventional loan home buyers with a credit score of less than 680 and less than 30% down will see a significant increase in interest rates. 

*Home buyers putting less than 5% down and a credit score of 620 will be ineligible for mortgage insurance.  If you don’t qualify for mortgage insurance then you don’t qualify for the loan.  This is not rocket science!!!

*Mortgage insurance companies will also require appraisers to document if a home is in a increasing, stable or declining market.  If a home is in a declining market then a buyer putting less than 10% down and a credit score of 620 will be ineligible for mortgage insurance.

The problems in the lending market are really starting to take their toll on home buyers loan options.  Again, most of these changes will affect conventional loans and not FHA loans.  In 2008, FHA will incorporate a sliding scale for mortgage insurance rates based on credit score.  This sliding scale system is more of a “reward” for higher credit guide scores than a “punishment”.  As of right now, there are no major underwriting or pricing changes forecasted for FHA loans.  So if you’re a potential home buyer next year, it is now even more important to make sure you use a good, experienced lender.  Contact me if you need a reference for a good lender or if you have any further questions.

HomeBuyer Advocate Mike