FHA refinance loans have helped out millions of homeowners lower their monthly mortgage payment with a fixed interest rate and no pre-payment penalty. Even with having so many FHA loan success stories, it seems there are many unhappy mortgage brokers, borrowers and industry pundits that come off like FHA can’t do anything right. There are several reasons why FHA has taken a lot of heat over the last year.
1. FHA loan defaults have risen dramatically over the last 48 months.
2. FHA mortgage reserves have dropped to dangerously low levels.
3. FHA guidelines have tightened significantly and most FHA lenders require a 640 credit score to refinance.
4. The FHA requirements for FHA streamline programs thus fewer borrowers qualify.
5. The change in the appraisal policy for FHA refinance loans has slowed the process and increased the closing costs for borrowers.
These 5 obstacles FHA has faced this year has brought forth new challenges for government refinance programs, but HUD maintains they are focused on improving FHA home loans for consumers, while increasing the accountability and FHA requirements for mortgage companies that offer FHA mortgage products.
FHA mortgage rates remain low with the 30 year fixed available at 5% and the 5/1 ARM available at 4.125%. The Federal Reserve left interest rates unchanged so FHA rates should continue their trend of affordability. For borrowers with less than perfect credit, FHA introduced a home loan that allows credit scores as low as 580, but requires a higher insurance premium with more equity or down-payment required. FHA refinance applications dropped last month, but that doesn’t mean Americans won’t reconsider FHA if they loosen the FHA guidelines a bit while keeping the rates at record levels.
