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Buying Homes and REO Land Becomes Difficult With FHA Loan Restrictions



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By : John Cutts    99 or more times read
Lenders have recently decided to tighten standards with regards to loans insured by the U.S. Federal Housing Administration (FHA), making it more difficult for Americans to purchase a house or an REO land. According to recent reports, loans insured by the FHA that lenders are willing to buy now require a credit score of 640.

Locally, a big number of buyers of Albuquerque bank owned homes and newly built houses will find this new requirement difficult to fulfill. Prior to lenders' decision, the minimum score of credit for FHA loans is 620. Nationwide FICO reports showed that over six million Americans can meet this new credit record requirement.

Around 20% of houses purchased all around the U.S., including bank owned homes in New Mexico, are financed by FHA loans. Raising the required score, housing analysts have stated, will negatively impact the housing industry which has already struggled with very few home sales and rising foreclosure rates.

The problem is also expected to affect those people who are planning to purchase lands, including REO land, across the country. Some housing market observers have criticized this latest move, arguing that although loose lending rules have contributed to the downfall of the country's housing market, there is no reason to stifle the industry's recovery by making it more difficult for homeowners to purchase dwellings.

They further argued that for the housing market to mount a sustained recovery, properties under lists of bank owned property and foreclosures should be sold and the latest requirement is doing exactly the opposite. The move, analysts further added, will mean that around 15% of FHA loan borrowers will fail to qualify or will be unable to buy a residential property using loans from the government agency.

The development is expected to have the biggest impact on minorities and potential borrowers living in areas that were hit the hardest by the foreclosure crisis and the recession. Those who oppose the recent decision by lenders have also asserted that it is effectively restricting the opportunities for people who have the highest need for such opportunities.

Some housing market observers have claimed that the requirement should be rejected and lenders should focus more on efforts that will increase the number of consumers who can purchase foreclosed properties and REO land.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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