Professionals question new FHA practices
10/25/2010
By Credit.com Staff
The new requirements put forth by the Federal Housing Administration have been largely embraced by many consumers and industry professionals alike, but some concerns still loom. The new rules require consumers to carry a credit score of at least 580 in order to qualify for FHA-backed loan with a minimum 3.5 percent downpayment. Consumers with scores between 500 and 579 are required to put down at least 10 percent and those with a score below 500 do not qualify.
While industry professionals support the new credit score requirements, many are concerned the debt-to-income ratio remains too high. Credit score aside, some borrowers are able to secure a loan with a debt ratio of nearly 55 percent of their income, according to the Boston Globe.
High debt-to-income ratios force consumers to put a large chunk of their monthly paycheck toward their mortgage payments, giving them little to survive on for the month and putting them at risk of incurring debt in the face of an emergency.
Consumers purchasing a home should make sure they have enough money left over after their mortgage payment to meet their other financial obligations and save a small portion.
