The changes were implemented on November 1st, 2020 and are designed to give borrowers a greater understanding of their rights and responsibilities when taking out an FHA loan.
The new rules require that all FHA loan applicants meet with a housing counselor before they can obtain an FHA loan. This is intended to help borrowers learn about the costs and responsibilities associated with obtaining an FHA loan so they can make an informed decision before taking out the loan. The counseling also helps borrowers understand the value of homeownership and details the risks of using an FHA loan.
In addition, the new FHA loan counseling rules require lenders to provide a list of approved housing counselors to each borrower to help them find a counselor that meets their needs. Borrowers are also encouraged to speak with non-profit or governmental agencies that may be able to provide additional financial assistance.
The FHA loan counseling rules also provide new guidelines for lenders who are working with first-time homebuyers. These guidelines require lenders to provide additional information to borrowers about the loan process, the benefits of owning a home, and the steps they should follow to ensure they are purchasing the best property for their financial situation.
Lastly, the new FHA loan counseling rules also address predatory lending practices. They state that lenders must provide full disclosure of any fees or costs associated with the loan, as well as a borrower’s right to cancel the loan within three days of signing the loan agreement.
The revised FHA loan counseling rules are intended to help borrowers understand the risks and responsibilities associated with obtaining an FHA loan. By ensuring borrowers have access to housing counseling before obtaining a loan, the FHA is helping to protect borrowers from potentially entering into a loan they cannot afford, or one that does not meet their needs. Additionally, the rules are designed to protect borrowers from predatory lending practices by requiring full disclosure of all fees and costs associated with the loan, as well as a borrower's right to cancel the loan within three days. All of these changes are intended to give borrowers a greater understanding of their rights and responsibilities when taking out an FHA loan, and to help them make an informed decision about whether the loan is right for them.
This article was contributed on Oct 22, 2023
