Good News Surfaces in a Crazy Market!

Enough Already!

It’s time for GOOD NEWS! And while this news does not directly impact Charlotte mortgage loans, this is still good news for us all.

A major (and I mean Major) lender has lowered the required credit score for FHA mortgages using down payment assistance in “declining markets.” This is a great positive thing to see!

A declining market is one that is seeing home values decline rather than increase. With FHA mortgage loans, the minimum down payment is only 3%, which in all reality does not place the mortgage company in any tremendous equity position! When you consider that down payment assistance pays for the buyer’s downpayment, you have a home owner with virtually nothing invested in a home located in an area that is seeing declining values. That would scare anyone lending home purchase money!

So to help ensure that only the best credit risks were able to buy these homes, many FHA mortgage lenders have imposed high credit score requirements. This one major lender placed a credit score requirement of 680 for this type of FHA mortgage loan using down payment assistance. Well, today they announced the score will be lowered to 620!

Could it be that the declining markets are not declining as much? Maybe there is a returning back to sanity and a realization that someone with mid 600 scores is still a good credit risk? I don’t know the exact reasoning, but I sure like to see this being relaxed a bit.

As I said, this does not affect FHA mortgages in Charlotte. Since Charlotte is not a declining market (due to Charlotte’s solid real estate market), we have not had to face this higher credit score requorement in order to use down payment assistance programs. However, if this is an indication of things to come, we may begin to see a relaxing of the credit market, which has gone a little too far in tightening up!

Again, it may not directly affect Charlotte’s FHA mortgage loans, but it’s good news and I will take it!

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