FHA Standards

The Federal Housing Administration is currently considering more stringent lending requirements and higher borrowing fees.  The new FHA standard will require borrowers with less than a 580 credit score to put down a minimum of 10 percent of the cost of the home.  Most banks that lend through the FHA require at least a 620 credit score.  Concerns that continued losses in the mortgage values could necessitate futher government bailouts have feuled this move.  Although any credit tightening is welcome, the agency will not propose an increase in the minimum downpayment for high credit scoring borrowers, currently 3.5 percent.

Although builders and realtors see this as punative, the previous regulation loosening that occurred in the late 1990s and caused the current recession, had to be reigned back in.  Many homebuyers are still spending over half of their pretax income on housing.  One could argue that continuing to allow that would be deemed "predatory lending."