FHA Tightens up in 2010
As promised in late 2009 the Federal Housing Administration is changing tightening its guidelines in an effort to strengthen its capital reserves which are dangerously low.
FHA Commissioner David Stevens had this to say:
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,”
“When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Changes include –
1. MIP being raised from 1.75% to 2.25%
2. 580 Fico and up requires 3.5% down and less than 580 fico = 10% down. (Currently few lenders accept anything below a 620 but there are 1 or 2 that accept 530 and up so this may not be too significant).
3. Seller concessions go down from 6% to 3%
The main change that would affect borrowers is the increase in PMI. Literally 100% of the borrowers I have closed on an FHA transaction have financed the MIP. This basically will increase the loan amounts $500 per $100,000, and raises the payment $2.76 per $100,000 based on a 5.25% interest rate.
As a Loan Officer I was pretty upset to hear that FHA guidelines were tightening. “Isn’t that all we have left for what seems to be at least 50% of the First Time Buyers out there?” was my first thought. These changes are understandable considering the hardships HUD has suffered with the rest of the industry and considering they will actually insure a loan for someone with a low fico and little money. We as real estate professionals should be thankful.
While I don’t like the fact we can no longer get a six percent seller concession the truth is most sellers stop at three to four percent anyway on these transactions. While the 2.25% is not great news for home buyers taking advantage of FHA, at least it will be financed into a low interest 30 year loan (currently).
PERHAPS THIS WILL HELP GET MORE BUYERS OFF THE FENCE AND INTO HOMES BEFORE MORE GUIDELINE CHANGES COME OUT!
LittleFish
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The Buzzz Blog | The Buzzz | January 20, 2010
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