Changes in FHA Mortgages--Buyers Need MORE $$ Upfront

If you are planning to buy or sell a house this year, you should know about big changes that will go into effect this spring. It will impact you as a buyer because you are now required to have a higher credit score or come up with a significant down payment. As a seller, you will still be able to assist with buyer's closing costs, but the amount you can contribute has been cut in half. (Paying buyer's costs is a very common seller concession during the negotiation process.)

Why did this happen? In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level. The drop in capital reserves has led Congress and the Administration to call for changes to strengthen FHA. Last Wednesday, January 20, FHA announced major changes to build up its reserve and ensure its long-term financial soundness.

· The upfront mortgage insurance premium (UFMIP) will increase to 2.25% up from 1.75%. FHA will continue to allow the financing of the UFMIP.

· New borrowers will now be required to have a minimum credit score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 credit score will be required to put down at least 10%. This rule may have little practical effect since the average borrower score is 693.

• Seller concessions will be reduced to 3%, down from 6%.

You can read more about this at CNNMonrey.com http://money.cnn.com/2010/01/19/real_estate/fha_loan_requirements/index.htm

The good news: mortgage interest rates dipped below 5% yesterday. That means it's a GREAT TIME to BUY! If you're beginning to look, call me or visit my website to see all homes now on the market. I'm here to help.