Given the ongoing pandemic, the Federal Housing Administration announced new guidelines that give leeway to applicants and lending services when conducting business that would otherwise be held in person.
The FHA issued several waivers to the provisions in its policy handbook, acknowledging the hardships many are facing during the pandemic.
Under normal times, borrowers would need to attend certain meetings to review essential mortgage services in person. Seniors applying for a home equity conversion loan, for instance, would need to make in-person contact with their lender at some junctures in the process.
The waivers permit future homebuyers to move ahead with their home-buying plans and have peace of mind that modified protocols and social distancing will be observed during these vital steps.
In addition to the new health and safety rules, the FHA announced three other waivers, two of which are specific to home equity conversion loans and a third to FHA loans concerning property charge payment reductions and signature requirements.
The new protocols will have a large impact on borrowers, as an FHA loan is federally backed and administered by FHA-approve lenders.
This massive program expands the path to homeownership through more lenient borrowing terms. For example, FHA applicants will not need to come up with a large down payment or hold an excellent credit score. FHA lending programs create wiggle room so borrowers can get into a home right now.
Millions of Americans have benefited from the FHA loan, which requires as little as 3.5% down payment. Financial assistance is also possible.
As part of the conditions, FHA homebuyers must use the home as their primary residence.
Given the program’s flexibility, the FHA loan is a springboard for first-time homebuyers. In addition to modest credit requirements, borrowers must also carry less than 43% in debt-to-income ratio.
FHA homebuyers are also required to be enrolled into mortgage insurance until a certain threshold is met, such as when 20% equity in the home is reached.
First-time homebuyers have extra incentive to make a move on an FHA loan. That’s because interest rates are at historic lows. So there’s a unique opportunity for first-time homebuyers to both enjoy low upfront costs to buying a home and low interest rates. The savings will last a lifetime.