Maine Real Estate News

Recently the FHA announced changes in risk-based premiums. Surprisingly, for the first time in history credit scores will be utilized by the FHA in lending. Announces Risk-Based Premiums

Let’s take a closer look at the ten primary changes to the FHA guidelines:

Borrowers with either no score or at least 500 may get an LTV >90%.
Borrowers with a score less than 500 get a maximum LTV of 90%.
Borrowers without scores will require manual underwriting.
Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score.
The Monthly Mortgage Insurance will range from .50% to .55% depending on score.
The premium is based on the borrower with the lowest score.
If one of the borrowers has no score, then the Non-Traditional credit grade is used.
Credit rescoring is allowed to improve a borrower’s credit grade.
All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
These changes apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.

The credit scoring model seeks to quantify the likelihood of a consumer to pay off debt without being more than 90 days late at any time in the future. Credit scores can range between a low score of 300 and a high score of 850. The higher the score, the better it is for the consumer, because a high credit score translates into a low interest rate. This can save literally thousands of dollars in financing fees over the life of the loan.

Only one out of 1,300 people in the United States have a credit score above 800. These are people with a stellar credit rating that get the best interest rates. On the other hand, one out of every eight prospective home buyers is faced with the possibility that they may not qualify for the home loan they want because they have a score falling between 500 and 600.