The Department of Housing and Urban Development announced two significant changes this week to those seeking a FHA home loan or mortgage.  The changes will institute tougher credit score standards and modifies the amount the home seller can pay towards the closing costs when getting the home loan.

The FHA will now required potential home buyers to have a credit score above 500.  In the past the FHA had no minimum limit on the credit score when applying for a home mortgage.  However, the impact of this change will be minimal.  During the second quarter of 2010, the FHA did not issue any home loans to borrowers with a credit score under 500.

As the real estate market has slowed, FHA mortgages have typically been a good entry point for the first time home buyer.  FHA home loans allow for just 3.5 percent as the required down payment on the mortgage.  They also allow for the seller to kick-in up to 6 percent of the closing costs of the home.  Many times closing costs must be paid for in cash when getting the home loan, which could make it harder for the first time home buyer to qualify for the mortgage.

Now the closing costs the seller can pay will be capped at just 3% of the price of the home.  The FHA made the change because they were concerned that sellers were inflating the price of the home, simply to payout up to 6 percent back to the buyer.

Some experts believe this change alone could reduce new home sales to the entry level market by as much as 15 percent.  The FHA believes these changes will have a long term positive impact for home buyers that are seeking a mortgage.

http://www.allnews365.com/fha-home-loan-mortgage-changes-coming/32488/