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Yes, it is more difficult to get an FHA loan now than it was before the “ liquidity crisis” in the mortgage industry. Until now, FHA guidelines had no credit score requirements. Starting July 15, 2008 FHA will not insure a loan with a FICO score less than 500 if the loan-to-value ratio is greater than 90%.
Also, prior to July 15, 2008, the monthly mortgage insurance premium and the up-front mortgage premium was the same for all loans for which mortgage insurance was required. Now, up-front mortgage insurance costs range from 1.25% of the loan amount to 2.25% of the loan amount and the monthly mortgage insurance premium ranges from .5% to .55% of the loan amount per year paid monthly. Previously, the up-front mortgage premium was 1.5% of the loan amount and the monthly mortgage insurance premium was .5% of the loan amount per year in monthly installments. For clarification, for a loan of $100,000 with a .5% premium, the monthly payment would be $41.67 ($100,000 * .5% /12 = $41.67).
Another way in which FHA loans have become more difficult to qualify for is not related to FHA, but to the banks and mortgage companies who offer them. Even before the Federal Housing Administration imposed minimum credit score requirements for certain loans, several banks and mortgage companies making FHA-insured loans imposed minimum credit score requirements for those loans. As it stands, several lenders will not make loans to borrowers with credit scores of less than 580. So yes, it has become more difficult to get an FHA loan. Watching your credit is now more important than ever.
Yes. But it does not mean it is difficult for everyone. Manually underwritten loans are rarer than they once were. Guidelines are now being adhered to in a greater degree than they once were. The keys are to have clean credit for the previous 12 months, funds that can be considered as reserves [money available but not spent at closing such as retirement accounts], a consistent employment record, saved funds for a down payment, etc. In other words, all of the same things that were required for FHA in the past. Improving credit scores by taking care of any collection accounts or chargeoffs is a good idea. Taking the homebuyer education class from a Newghborworks HomeOwnership Center is also a good idea. FHA still allows for co-signers, but this does NOT offset poor credit.
Is it harder to get an FHA loan today because of everything that has happened in Banking?