FHA Borrowers Benefit from FHA Rule Changes
FHA Loan Changes
For example, FHA loan limits are subject to review every year, and in the last two years, those limits have only increased.
FHA has modified its requirements for FHA condo loans, making it possible for qualifying condo units in projects not on the FHA-approved list to be purchased with FHA mortgages under the right circumstances.
FHA Loan Changes for Approval
Did you know that in 2023, the FHA and HUD modified the FHA program to stop including alerts to the lender about past denied home loan applications?
Borrowers previously rejected for an FHA loan had that rejection on their official records for six months following.
FHA rule changes included removing those “flags” from an applicant’s file. According to an article published by Forbes Advisor, “The flags, which applications used to carry for six months, were meant to help originators of FHA-insured mortgages assess the risk of lending to someone who had previously been denied.”
But further inquiry showed those alerts didn’t have much utility for borrowers or lenders.
According to Forbes, those alerts were one important reason some borrowers would be rejected again even if the applicant otherwise qualified for the mortgage.
From the FHA perspective, such warning notices did little more than slow down the rate of loan processing.
Why the Changes?
The federal government’s philosophy for FHA loan approval includes the notion that an applicant should have a fair shot at loan approval from a different lender if they fail to be approved the first time.
The revised FHA approach is meant to offer another chance without having to apply under the shadow of a prior loan denial.
Borrowers who apply for mortgage loans typically comparison shop among several lenders. When you apply for a home loan, there’s a window of time when multiple applications will not result in a big negative credit “hit” on your credit reports.
The revised FHA loan application rules are meant to further help in the process of multiple pre-approval credit applications and related procedures where necessary.
------------------------------
RELATED VIDEOS:
What Is an FHA Loan?
Using an FHA Loan Calculator
Meeting FHA Loan Guidelines Improves Your Chances
Do you know what's on your credit report?
Learn what your score means.