FHA, important new changes for 2010. Lender preapproval, a wise FIRST step

I am writing this blog because of all the important changes that are coming this year from HUD as regards FHA insured mortgages.

There are a number of important new changes - some will help buyers immediately and some may make it a little harder for some buyers to make a purchase. I won't go into all the details here but here is a brief rundown of changes:

1. seller contribution to closing cost is now capped at 3%

2. Credit score requirements changed

3. Upfront mortgage insurance premium raised to 2.25% (it can be rolled into the loan and was 1.75% before this change)

4. the "seasoned" property rule on flipping has changed, making it easier for buyers to purchase investor owned properties as soon as they are ready for resale. In the past investors couldn't sell to a buyer who required FHA insured financing until after 90 days from the date of their purchase of the property. The HUD is calling this change a "temporary waiver" of the flipping rule. There are conditions attached to this waiver - consult your lender before making an offer on a property that may be affected by this rule.

Why is it now so much more important to speak with a lender first? Even in the best of times obtaining an FHA insured mortgage loan can be difficult what with credit restrictions etc. There is no gain for the buyer to spend time finding the perfect property only to find out that you won't be able to pull your little ball of yarn together in order to obtain approval on FHA financing.

For some borrowers the minimum down payment may be higher than 3.5% in the very near future. You need to understand up front how you stand and what your financing options may or may not be, before you start the house hunt. Save yourself some grief, get your ducks in a row, and make this market work for you.

Even or professional agents and mortgage loan originators all of these changes are difficult to stay on top of and this is what we do! I recently worked with a buyer, showed him just a couple of homes, and was able to convince him to speak with a lender before we went further. In our conversations he sounded like a guy with a great job who was "ready" to make a purchase. He talked the talk. . .

My lender called me a few days ago to tell me that unfortunately this "buyer" won't be making a home purchase for quite some time. His credit was a nightmare. It was so bad that the lender said he thinks that it could take this guy a couple of years or more to get all of the delinquent items paid off, and the score headed back in the right direction. This is a really nice guy. He has a nice job. He has the ability to pay but not the ability to obtain a mortgage. This is NOT the type of person who should be out actually going into houses - it's a waste of time for him and any agent that he works with.

Don't be afraid that the lender is going to chase you down and force you to buy a house. Reputable lenders will typically offer some assistance to head you in the right direction to repair your credit issues to help turn you into a buyer as soon as possible. Make the phone call. Be prepared to discuss all of your income, your debts, all of them, your work history, everything.

The more information that you give a lender and an agent on the front end, the MORE they will be able to assist you.

Read the details of all recent changes for yourself - don't rely on this blog or anything other than "the horse's mouth". Visit http://www.fhasecure.gov and click on "single family" to see a list of articles, changes, etc.

Best of luck with your purchase in 2010 - it IS a great time to be a buyer.