Recent changes to the Federal Housing Administration’s (FHA) rules and regulations now offer more borrowers a number of opportunities to finance or refinance their homes.
Starting in 2023, FHA will allow lenders to extend mortgage insurance on loans up to 98.15 percent of the home’s value, up from the current limit of 96.5 percent. This change is part of an effort from the Department of Housing and Urban Development (HUD) and FHA to update their policies with current market realities in order to ensure that homeowners are able to access financial assistance for housing needs with less burden than in the past. The new rules also extend mortgage loan terms from 15 years to 30-year fixed rate mortgages not only for existing borrowers but also for first-time buyers looking to get into a home of their own.
Additionally, FHA will allow lenders to extend credit scores down as low as 500 if they can demonstrate that they have signed an agreement with a quality management company such as CoreLogic or Equifax that provides monthly non-traditional credit reporting sources such as rent payments, utilities, and cable bills.
In addition, FHA has increased its maximum allowable purchase price for one-unit properties from $363,000 up to $400,000 for most areas across America—and has eliminated the cap altogether in some higher cost markets such as San Francisco, Seattle and Honolulu where real estate prices often exceed those limits. Finally, HUD has stated that all Home Equity Conversion Mortgages (HECM) will be included under the new requirements and guidelines set forth by FHA’s Mortgagee Letter 2020-2021 effective June 1st 2022.
This means that HECMs may be used by seniors aged 62 or older who wish reverse mortgages on qualifying properties—even if those properties don’t meet other lender guidelines due to novel repairs or improvements needed on homes beyond standard requirements.
These updates are designed to create a more accessible mortgage system so that qualified borrowers can take advantage of better interest rates while making it easier for them find suitable financing options no matter what stage they’re at in life or what type of property they need financing for. Start exploring your dream homeownership goals today!
