Let's not forget about these new guidelines, they affect all of us.
Some great, simply explained, FHA changes to it's lending policy.
New Lending Policies Announced by FHA
If you've been listening to the housing news, you've probably heard about some lending changes that were announced by the Federal Housing Administration (FHA). While many of the news reports were confusing, the truth is pretty clear...and isn't as bad as some people may have heard.
Overall the measures announced by the FHA are intended to help the organization better manage its risks and strengthen its capital reserves, while still providing home loans to the nation.
The good news, as FHA Commissioner David Stevens stated recently, is that "by continuing to provide affordable, responsible mortgage products, FHA will support the housing market's recovery" and "remain the largest source of home purchase financing for underserved communities."
What's Changing?
If you or someone you know is considering an FHA loan, some of these changes may affect you. Here's a clear, concise rundown of the major changes and what they mean:
1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing. This change will become effective on April 5, 2010.
2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility.
3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.
In addition to these changes, the new policies contain a series of new measures aimed at increasing lender enforcement.
The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans.
MORE INFORMATION on this and any other loan questions can be directed to my loan officer
Steve Vels Heidi Engel REMAX Suburban
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American Fidelity Mortgage Service LISTING + SELLING HOMES for OVER 20 YRS
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SteveV@amfsi.com HeidiRemax@aol.com
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Christine - While this is actually good news it will have an adverses affect on the number of home buyers now eligible to buy a home.
I think Bob's got a point, but I am also strongly opposed to PMI. In my opinion the high rates of PMI is already part of the problem. And since many appraisers are playing it safe by appraising properties within a few hundred dollars of offer price, there will probably be still more people paying PMI who really shouldn't be.