Mortgage and Real Estate Blog


FHA tightening rules - Big deal or not?

Minneapolis, MN: FHA has announced tightening of their guidelines that lenders must follow when approving loans. It estimates 4% to 5% of all FHA loans would be affected going forward versus current FHA guidelines. This works out to be between 40,000 to 50,000 loans this year.

Should we be worried? 

Not really. While the guideline change headlines posted around social media and on the news sounds all doom and gloom, the reality is the change targets just a small group of potential home buyers with both low credit scores and very high debt-to-income ratios.

FHA Guideline Update

Post Crash Changes

Immediately after the housing market crash, all lending rules were significantly tighened. As the markets returned to normal, underwriting guidelines also returned to a more traditional pre-2001 level.

In 2016, FHA guidelines were relaxed even more for clients with below 620 credit scores and debt ratio's over 43%. This has resulted in an explosion of FHA loans with back debt-to-income ratios exceeding 50% - YES, 50%!  That is crazy. This has also resulted in the average FHA loan credit score dropping to just 670, the lowest average score in the past 10-years.

Moving Forward with FHA Loans

As one can imagine, FHA is very concerned about the performance of these high risk loans, and is simply pulling back some guildelines to make sure these high risk loans receive a "more rigouous manual underwriting process" before being approved.

Will this result in a few people getting denied that may be approved today?  Absolutely.

But understand it is the right thing to do in both the interest of long-term FHA solvency, and not putting someone in a loan they really can't afford.


Ready to get started on your FHA Loan?

It's easy. Simply complete the Online application.  You'll be applying directly with me, Joe Metzler, an experienced, multiple award winning Loan officer with over 20-years in the the business. We lend in MN, WI, and SD. Learn more about me HERE.

Mortgage lender in MN, WI, SD

Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and Top 300 Loan Officers in the Nation for 2010, 2015, 2016, and 2018.  To finance with Mortgages Unlimited, your local preferred mortgage lender for Minnesota, Wisconsin, and South Dakota, simply call  (651) 552-3681, or APPLY ONLINENMLS 274132. Equal Hosuing Lender.




Comment balloon 2 commentsJoseph Metzler • March 26 2019 05:46PM
FHA tightening rules - Big deal or not?
Minneapolis, MN: FHA has announced tightening of their guidelines that lenders must follow when approving loans. It estimates 4% to 5% of all FHA loans would be affected going forward versus current FHA guidelines. This works out to be between 40… more
How long before mortgage insurance cancels?
Minneapolis, MN: Mortgage insurance? Everyone asks how long before mortgage insurance cancels is a pretty common question when buying a home. The answer can vary greatly bepending on loan program chosen, the down payment size, and market conditions… more
All this snow will make the market hot
Minneapolis, MN: Are your tired of the snow yet? Record amount of snow, including the most snow ever in February here in Minnesota, along with continued below average temperatures is expected to delay the local spring this year. As many people,… more
You can use your tax refund for down payment
Minneapolis, MN: One of the biggest reasons people don’t buy a home is the lack of down payment money, and the false belief that you need 20% for down payment. We get it. Saving is hard. Not only can you use your tax refund for down payment, your… more
Why a VA Loan?
A VA loan is perhaps the most amazing loan in the housing market today! Minneapolis, MN: Rather than issue loans, the VA instead pledges to repay about a quarter of very loan it guarantees in the unlikely event the borrower defaults. That guarantee… more
How to shop smarter for your mortgage loan
Minneapolis, MN: I get it. You are buying a new home, or refinancing your existing home mortgage, and are looking for the best mortgage interest rate. But buyer beware, the Internet is full of places to avoid. So here I'll give a little primer on… more
Credit scores and how they affect mortgage loan approval
Minneapolis / St Paul, MN: When buying a home, your credit matters - a lot. While credit scores alone don't get you a home loan approval, credit scores are one of the most important factors in the loan approval decision. With places like Credit… more
The Digital Mortgage Hype
The Digital Mortgage Hype It is 2018. The number of people who physically step into a bank or mortgage lender to do a home loan application is dwindling everyday. The vast majority of people now complete an online loan application on a desktop… more
Lender credits reduce your out-of-pocket costs
Minneapolis, MN: The biggest challenge for most home buyers, especially first time home buyers, is coming up with the required down payment. While most people understand down payment, they are shocked to learn their are mortgage closing costs… more
VA loan myths dispelled
Minneapolis, MN: VA home loans are one of the greatest benefit to our U. S. Military personal that most vets will ever use. Dispelling VA loan myths that prevent them from using their benefits is therefore very important. VA loan Myth 1): All… more