The New Homebuyer $8,000 Tax Credit certainly stimulated the economy and raised new home buyer hopes of finally being able to afford a home but will the tax credit extension still enable the great American Dream? It’s not likely.
Just a few weeks ago we were elated that Congress was in talks to vote for a tax credit extension; it meant more new homebuyers could get their hands on the extra funds for down payments, closing costs and other expensive fees. Combined with low mortgage rates this sounded like another windfall for those looking to move from renter to homebuyer; and now the other shoe falls – problems with FHA loans.
An FHA mortgage loan allows the homebuyer to make a modest down payment (3.5% of the purchase price) and qualify with less stringent credit requirements – that is until now. It’s been reported that 1 in 5 FHA mortgages default and tightening of the strings will surely follow - again.
When we first delved deep into the recession, FHA loan requirements were still pretty relaxed and credit score requirements still hovered around 630ish and now we’ve moved up much closer to 680-690ish. With the recent FHA report and outlook for next year, it’s more than probable FHA loan requirements including credit, job and stability will be scrutinized more efficiently.
The government cannot stand to sit by and lose more money, month after month; therefore once again they must tighten up on the loan requirements. So while that new homebuyer tax credit extension looks promising it’s going to bypass many people who thought they would be in a new home soon.
Many people look at low credit scores as a bad bruise, no longer just a blemish. But take into account of all the jobs lost and how many credit scores suffered those after effects.
The mortgage industry will never be the same.
