Credit is of considerable concern when it comes to buying a home, but if you’re on the market for a new place in the next few months there may be some timely news that applies to you. If you haven’t heard about the changes to the Federal Housing Administration’s (FHA) credit score minimum, here’s some information on the recent reduction and how it may impact your home purchase.
Information On The FHA
Started in 1934, the FHA is the organization responsible for insuring the loans that are available to homebuyers in the United States. These loans are not provided directly by the FHA, rather the FHA serves as the insurer for the loans that are leant by financial institutions of the United States. While there are a number of guidelines that must be met by borrowers in order to ensure the FHA will back their loan, a lowered mortgage minimum credit score means that those with a less-impressive credit profile may have a better opportunity for home ownership.
The Minimum Credit Score Reduction
The strength or weakness of your credit history has a significant impact on whether or not you will qualify for a mortgage or even pre-approval, so for those whose credit has suffered the recent drop in the minimum will be good news. Previously, the FHA required a score of 640 so that a borrower could be approved for a mortgage, but the reduction by 60 points to a credit score of 580 means greater possibility for those who might fit into a lower credit category.
A Lower Mortgage Minimum And The Market
With the opportunity for home ownership that will be opened up to potential buyers, there is a strong possibility that the market will experience a noticeable shift. Many millennials are poised to enter the real estate market this year, and with more people considering a house as a result of a reduction, there could be an increased demand in housing purchases. While the prices in rural areas have been dropping off, the housing in metropolitan areas may experience a sizeable upsurge.
With the reduction of the mortgage minimum credit score by the FHA, there are likely to be some shifts in the real estate market in the coming year that will affect demand and price. If you’re on the market for a new home and are interested in a purchase that will align with your finances, you may want to contact your local mortgage professional for more information.
Buying a home involves a variety of nuances and strange-sounding terms, and one of the least understood aspects of the home buying process is the escrow account. Essentially, an escrow account is a third party bank account your lender can require you to pay into in order to cover certain costs related to your home. Your lender uses an escrow account to ensure that property taxes and home insurance fees get paid on time.