For more information on the FHA changes, inlcuding a summary of all changes,

According to Freddie Mac on Thursday, the 30 year fixed rate dropped from an average of 4.78% to 4.71% from last week. This is the lowest since Freddie Mac compiled data since 1971. Rates have been low all year because of the Fed’s purchase of mortgage-back securities, which in end in the Sping of 2010. This is helping to push mortgage applications which increased 2.1% during the Thanksgiving week stated the Mortgage Bankers Association. But while rates are low, there are still tight credit standards which may hinder buyers qualifying for the lowest rates.  Most buyers will need 20% down, and a high credit scrore in order to qualify. But the push has helped drive more than 4 percent in purchase applications and nearly 2 percent increase in applications to refinance existing loans.

More Cash Required for an FHA loan

The Federal Housing Administration officials are proposing policy changes for FHA-insured mortgage borrowers to help the agency increase its federally mandated funding requirements. Higher credit scores and an increase in the current minimum down payment may be what buyers across America will have to have an order to qualify for and FHA loan. This proposed change is due to increasing financial issues FHA has been facing, which has increased it’s exposure and led to more delinquencies. The Obama Administration may try to propose other ways of increasing closing costs instead of increasing the minimum down payment, such as increasing mortgage insurance premimums or raising minimum credit score requirements so that the change would only effect the lower scoring borrowers. This will make it harder for some but will also reduce the risk of FHA having financial difficulites. FHA’s traditional role was to help American’s reach their dream of homeownership. The details of the change aren’t expected to be final until next month.

Vantage Solutions, a scoring company created by the three national credit bureaus, suggested loan modifications may increase a borrowers’ scores, while refinancing mortgages that are upside-down may not have any or very little impact. Short sales on the other hand can trigger large declines in credit scores. Homeowners with an excellent score might see a 120 to 130 point decline after a short sale. Homeowners who walk away and stop making payments can expect their credit scores to dip 140 to 150 points. Those who file bankruptcy can have an average hit of 355-365 point drop. 

Consumers who contact their lender early on may have less of an impact to their credit scores. In any of the above cases, if consumers are really having troubles due to the declining market, lenders will probably take this era into consideration when granting mortgage loans.