HUD loans – Specifically FHA Loans, are loans insured by the federal government which are designed to help low down payment, or credit challenged borrowers. 

The mortgage industry has been looking at FHA loans as one of the last ways to help the non-perfect customer borrow against their home, or buy a home.  Now latest news out is that FHA in 2007 endured one of their worst financial periods ever, losing 4.6 Billion dollars.

Contrary to popular belief, FHA loans are becoming increasingly more difficult to get, and that trend does not appear to be changing given this news.  Where a minimum credit score traditionally was not required on FHA loans, many lenders have required a 580 or higher. 

It is certainly reasonable to expect that someone requesting tens of thousands of dollars be expected to have such a low starting score, however some of the human element that has always been involved with granting these loans has been lost.

In the past, if you had a poor score, but it was the result of a) incorrect information or b) severe circumstances out of your control, it was possible to provide proof refuting the credit report and your ability to make the payments.  Now, some lenders will not look at the loan if it does not have the required score at all. 

Specifically attacked in this WSJ article is down payment assistance programs, which help borrowers purchase homes with a reduced cash investment.  These programs were under fire and some were slated to be discontinued late last year.   They continue for now, but for how long? 

If you are in the market to buy a home in the next 12 months, holding out for further price decreases, may work against you.  It’s possible you could get a lower price, but you may need more cash that you can come up with to buy it.   Take advantage now, while the programs are available and the prices are great.

Craig Garcia is a Managing Member of Bridge Capital Lending, LLC. A mortgage and investment firm specializing in Investor Loans that Use Private Lenders that fund Hard Money Loans. Craig can be reached at 877-8GO-GREEN or 954-217-9518. Gene Schroeder and Angelo D’Alessandro are the founders and owners of Bank On It! – A Real Estate Investment Firm that sells Investment Properties at Wholesale Prices. Gene and Angelo can be reached at 954-515-0030. The three have also formed a service to connect prospective borrowers to a network of Local Mortgage Brokers called 888-2Lend-Fast.     

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