FHA Considering Lowering Max Debt Ratio

A few weeks ago, I warned about the threat of lower FHA Loan Limits rolling out this fall.  More bad FHA news to announce as FHA is considering tightening the maximum debt ratio on FHA loans, too.  This issue is still in the “comment stage” and exact details as well as timing are still being debated.  FHA has made other moves to attempt to lower its delinquency rate and strengthen its Mortgage Insurance Fund, but this is the first time that a lower debt ratio has seriously been considered.  Without question, this would limit who could get an FHA loan, which would probably lead to a further drop in home prices.   

FHA loans are very important to the market.  FHA’s market share has surged from less than 2% of the market five years ago to about 30% of the market today.  This time last year FHA was considering lowering the amount of seller concessions from 6% to 3%.  Fortunately, this stalled out during the comment period so, hopefully, the proposed lower debt ratios will as well.

August 5, 2011 by · Leave a Comment

About James

James A. Williamson is currently the Sr VP of Sales Development for Shelter Lending Services (formerly Fairfield Mortgage). James joined Shelter in 1994 and was the company's top Loan Officer in GA for 20 straight years helping over 2500 families finance their homes. James now oversees an incredible group of Loan Officers in Atlanta while further building Shelter's Atlanta business.

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