FHA TRYING TO GET RIGHT BALANCE WITH NEW RULES
FHA announced tightened lending requirements in late January. The changes are being implemented to increase FHA's capital reserves and help the agency do a better job with risk management.
The new rules will require a Buyer to either spend more to obtain a loan or to purchase at a lesser sales price.
FHA is increasing the up front mortgage insurance premium to 2.25% from 1.75%, raising the minimum down payment to 10% for borrowers with a credit score of 580 and below (it stays the same at 3.5% for everyone else) and is reducing allowable seller concessions from 6% to 3%.
For many first time homebuyers who haven't developed much credit history, their FICO scores may fall below 580 making it necessary to come up with the 10% down payment. This could prove to be out of their reach unless they can get help elsewhere (like family).
Reduced seller concessions will also hurt because these funds are traditionally used to help with the Buyer's closing costs. The higher up front mortgage insurance premium could affect how much payment a Buyer can afford.
These measures are being taken to insure a healthier FHA, which makes approximately 40% of all mortgages nationwide.
Written by Erin McBratney, Realtor
» Posted by Peter
