FHA Announces Spring Cleaning February 8, 2010
Posted by Pat in : my thoughts on stuff , trackbackAcquiring a mortgage loan from the FHA is about to become more expensive.
The FHA announced a number of policy changes to cut back their overall liability.
It will mean tougher home loan approvals and higher expenses to secure a home loan approval for those who wait.
There are three major changes in guidelines outlined in the update.
- Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
- Minimum 10% down payments for those with less than a 580 FICO
- Seller credits are being limited to 3%. This is 50% of today’s 6%.
The FHA in addition has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.
In our FHA vs. Conventional comparisons, FHA keeps winning because the MI premiums are so low.
The FHA is trying to keep home loans affordable, but yet manage the risk.
What is more , they are going to improve the standard of their providers. They are introducing a “termination clause” to address the issue where it starts. Should certain lenders represent a disproportionate number of the bad loans, they’ll lose their right to originate FHA loans.
As a consequence, home buyers can expect tougher FHA underwriting in 2010. This won’t be as much because of the guideline changes, but more as a result of the “termination clause.” For lenders to prevent being the “bad lender,” they will add overlays to insure that they do not possess a disproportionately bad portfolio. Examples of this already exist: The FHA will permit 580 FICO scores, but almost all lenders require a minimum of 620 FICO.
The new guidelines don’t go into effect until spring, but acting now will save the up-front mortgage insurance premium monies plus lock in today’s monthly mortgage insurance payments before those too get higher priced.
With the FHA loan rates recovering, this might be as cheap as it gets.
Stay current on all the FHA home loan approval changes on the site.
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