As of Monday, the FHA will be updating it's TOTAL (Technology Open To Approved Members) Mortgage Scorecard. This will result in stricter credit requirements for homebuyers. Buyers with credit scores between 580 and 640 will now be at risk of being denied a mortgage. These new guidelines will affect ALL mortgages assigned a case number on or after March 18th, 2019. Borrowers that were already pre-approved may now be denied as they will be held to the current set of higher standards.
The Federal Housing Administration is looking to manage risk by decreasing the amount of loans to what they deem as"high risk" buyers: those that have low DTI (debt-to-income) ratios combined with low credit scores. They are cracking down on mortgage approval for buyers with DTI ratios above 50% as well as credit scores below a 640.
What will this mean for realtors and lenders?
Any mortgages submitted on or after March 18th through the automated underwriting system may be sent back requiring manual underwriting. These manual underwritten mortgages MUST be in compliance with all existing FHA requirements.
Don't waste time putting through deals that will be denied. Check with your lenders first to be sure borrowers still qualify. Don't let your reputation or your closing rates suffer.
For clients that need fast results to meet these new credit and DTI requirements, we are standing by to help.