A Note on the New FHA Rules
The Federal Housing Administration has announced major changes to its program. The agency will increase the amount of upfront cash paid by new borrowers and require higher down payments from those with the poorest credit.
Upfront insurance premiums paid at the closing table will increase to 2.25% of the loan value, but buyers will be able to finance the premiums. Borrowers with credit scores below 580 will be required to put at least 10% down. Home buyers with higher scores will still be allowed to put down as little as 3.5%. FHA also plans to reduce seller concessions from 6 to 3% of the home’s value.
These policy changes come on the heels of FHA’s announcement in Oct. 2009 that its capital reserve fund had fallen below the congressionally mandated level of 2%. Lawmakers believe these changes will help ensure the agency’s financial soundness and fulfill its mission of serving borrowers not adequately served by the private sector.
Since August 2008 equity lines used as second mortgages and traditional second mortgages have become almost non-existent. Buyers without at least 20% down have turned to FHA financing as their only choice. The upfront costs at closing are high and private mortgage insurance is required. But, a large percentage of buyers are thrilled with this option providing financing to purchase at an optimum time.
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Related posts:
- Mandatory FHA Loan Fees Increase For Some, Fall For Others
- Get Your FHA Mortgage Application Started — Fees Increase 1/2 Percent Starting Monday, April 5, 2010
- 10% down and not FHA!
Justine is a second generation real estate professional and leader in the San Mateo County market. She aims to satisfy every client, and she brings the nonstop energy and extensive marketing programs that get results. For questions or to reach Justine you can contact her at justine@justineford.com.
