Recent Changes to FHA LoansFriday, January 22, 2010

As a First Time Home Buyer, using the FHA loan is a very important tool in acquiring a home with lower out-of-pocket cost and very favorable terms. The recent changes are attracting a lot of attention, however they will not have much impact on your buying power. Most importantly, these changes will help ensure that the FHA stays around and helps new buyers become homeowners during this amazing real estate market.

The basic changes are:

• The Upfront Mortgage Insurance premium has been increased .500% to 2.25%. This is typically financed into your loan. It does increase the loan amount, but in all honesty at the low prices and low rates of interest, this change will very little impact on your loan.
• For borrowers with credit scores below 580, 10% will be the minimum down payment amount. This change makes perfect sense, and any of my clients that are in that credit score range work with me to improve their credit before buying a home to take advantage of better rates and lower downpayment requirements.
• Decrease the allowable seller concessions from 6% to 3%. In some instances, this change might negatively impact a purchase in which considerable credits are being negotiated to the buyer. However, in the case of covering your closing costs, 3% will typically cover that amount - and any repairs the seller would like to credit you money for versus fix can now be requested to be completed by them before you take ownership of the home.

These changes will start in mid Spring and Summer, so if you are considering buying a home, now is a great time to get prepared.

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