When it comes to taking out a mortgage loan there are some significant differences between a conventional loan and an FHA insured loan. Generally speaking, FHA loans are easier to obtain than conventional loans. However, the foreclosure troubles have spurred some interesting changes in the mortgage industry, one of which includes making some changes to FHA mortgage rules.
In the past, FHA loan lenders required a minimum of 3.5 % down payment on a loan, compared to the 5 or more percent required in a conventional loan. Offering a wider variety of loan types, FHA loans generally offered first time, or poor credit, buyers better interest rates than if they had been eligible for a conventional loan. However, changes to the FHA rules are about to make securing a loan more difficult.
Until now, buyers with less than perfect credit could obtain an FHA loan with relative ease. A new rule is set to take effect July 1, 2012 that is going to tighten the standards of credit qualifications and debt requirements on new FHA loan applicants. Anyone with $1,000 more in debt collection will no longer be able to qualify for an FHA loan, unless they have begun making payments towards the debt before applying for the loan. Also, anyone who has a foreclosure on their record must wait a minimum of three years before they will even be considered for an FHA mortgage loan.