FHA Guidelines and Changes Coming
Thursday, March 25, 2010
FHA is in the process of making some pretty big changes to their lending guidelines. FHA mortgage specialist Bill Skerbetz of Equity Resources (740) 349-7082 shared a useful worksheet with me that highlights 5 of the more key changes that are in the works for an FHA loan. This information is going to be very helpful for consumers thinking of buying or selling a home in the near future.
- FHA Financing Allowed for Properties Being Resold within 90-Days. FHA is allowing the use of FHA financing for properties being resold within the 90-day period after the previous acquisition. This is not limited to foreclosed properties. The purpose is to encourage investors that specialize in property renovation to acquire foreclosed and abandoned homes in an effort to increase the availability of affordable homes for homebuyers. In effect for all sales contracts executed on or after February 1, 2010 and will remain in effect for one year unless extended or withdrawn by the commissioner.
- Maximum Seller Contributions Reduced to 3%. Seller contributions to pay borrower closing costs is currently 6%, but will drop to 3%. Using $100,000 purchase price, that is $3,000 less the seller could contribute. This will go into effect this summer.
- Up-front Mortgage Insurance Increased to 2.25%. The Up-front Mortgage Insurance that FHA requires on most of their loans will be increased from 1.75% to 2.25%. This amount is added to the final loan amount, so there will not be additional funds needed at closing from the borrower. Good news is they will continue to allow this to be financed! Effective for FHA case numbers assigned on or after April 5, 2010.
- Monthly Mortgage Insurance Premium (MIP). They are pursuing legislative authority to allow flexibility to bring the annual MIP higher (currently capped at .55) so they can shift some of the premium increase from the up-front MIP to the annual MIP. The annual MIP is paid over the life of the loan instead of at the time of closing so this will reduce the impact to the borrower. This is still pending.
- Low Credit Scores. Borrowers with credit scores below 580 will now be required to put a least 10% down. This is kind of a non-issue because few lenders that offer FHA loans will accept credit scores below 620 in today's market. This will go into effect this summer.
Watch our website and blog for future updates as these FHA changes take place.
Sam Miller
