FHA Requirements are Tightening During the COVID-19 Pandemic – Why?

FHA loans may be a little harder to get these days, thanks to the COVID-19 pandemic. The once incredibly flexible loan program has gotten slightly more difficult to obtain, but the FHA themselves haven’t changed a thing. It’s the lenders that are tightening things up

In the eyes of the FHA, you still need the basic qualifications of a 580 credit score to qualify for FHA insurance. The lenders and investors aren’t comfortable with this right now, though, because they know there are a large number of forbearance coming up which may then lead to a large number of defaults.

The fear that the pandemic is going to cause a major influx of foreclosures is causing lenders and investors to panic. What that means is tougher qualifying requirements. Investors don’t want to take a chance on a loan that may default in a matter of months.

What can you Do?

If you’re in the market for an FHA loan, you still have options. Like I said before, the FHA themselves haven’t changed their requirements. There are still lenders out there willing to write and fund loans, but you have to prove that you qualify.

Like always, this means:

• Maximize your credit score. Take the time to look at your credit. If you don’t know what your credit looks like, pull your free credit report from annualcreditreport.com. If you see areas you can improve, such as late payments or overextended credit, take care of it.
• Lower your debt ratio. Lenders care about your current debts compared to your gross monthly income (income before taxes). Ideally, your mortgage shouldn’t take up more than 31% of your gross monthly income and your total debts shouldn’t take up more than 41% of your income, but some lenders may tighten restrictions so pay down any debts you can.
• Have stable employment – This is the key. Lenders want to know that your job is stable. During the pandemic, this may seem impossible, but if you work in certain industries (essential industries), it’s easier to prove and lenders may be more willing to give you a loan.
• Have assets – Do you have liquid assets on hand? This is worth so much more than anything else. If you have ‘reserves’ or money on hand that can cover the mortgage payment should the worst happen and you lose your job, it speaks volumes to lenders, making it easier for you to get a loan.

I’m here to help you. If you need a mortgage right now, whether to buy a home or refinance your current home, I can find you an FHA loan that will accept your qualifications. I encourage you to take the time to maximize your qualifying factors, ensuring that lenders will look favorably upon you and then I can help you navigate the waters, finding the perfect loan that will help you achieve your dreams, whether it’s buying a home or improving your current mortgage situation. I’m here to help!