FHA Taking More Risk

Really, you think?  I have been talking about this for quite some time now.  David Stern, the Commissioner of HUD, came out yesterday talking about how you need a minimum of a 580 credit score in order to put down only 3.5% and if under 580 you have to put down 10%. 

Apparently they don’t know what a credit score means, a person’s willingness to pay their bills.  They also need to pay more attention to the debt to income ratios.  Fannie Mae went to a maximum of 45% and 50% with compensating factors back on December 8, 2009.  FHA still allows up to 55%.  Remember, that’s 55% of your gross income and not taking into account, children, insurance, groceries, gas, etc.  Chase just came out with an announcement starting Monday March 8th, 2010 they will only allow up to 50%.  You still shouldn’t be that high but sometimes income is calculated very conservatively not taking into account bonus, commission, overtime, etc.

They also need to pay more attention to reserves after closing because as I have said before and post articles on there are additional expenses involved with owning a home.

Take a look at the chart in this article showing the increase of FHA loans from 1990 until 2009.  It’s scary.