FHA Announces Changes! 1/20/2010

FHA insures lenders and enables borrowers to obtain fincancing with as little as 3.5% down payment. It also allows borrowers with less than perfect credit and higher debt ratios.

According to the Wall Street Journal, the Federal Housing Administration will announce its changes and new guidelines Wednesday, January 20, 2010. It is reported that FHA is currently funding over 1/2 of the purchases in many housing markets. FHA is required to have a 2% reserve of their total loans insured, however, this reserve has fallen to about .5%. The downturn in the economy and loose guidelines are obviously the reason for this decrease.

To deal with rising deliquency and shrinking reserves, FHA is forced to make changes or they may be faced with asking congress for taxpayer money. In an effort to increase reserves, the WSJ has reported that FHA will:

1. Increase the Up Front MIP from 1.75% up to 2.25%. (This premium can be financed into the loan.)
2. Increase the Monthly Mortgage Insurance.
3. Decrease seller concessions from 6% to 3%. This will most likely mean many borrowers will need more than the minimum 3.5% down payment.
4. Borrowers with credit scores less than 580 will need 10% down payment. (FHA does not have a minimum credit score, but most lenders require a minimum of 600 or 620.)

As WSJ mentions, FHA is trying to protect taxpayer dollars, while also trying to help the housing recovery. Thus, they will not be increasing the minimum down payment of 3.5%.

It was not mentioned when these changes would take affect. To read the full article, click on the link below:

http://online.wsj.com/article/SB10001424052748704320104575015013235518270.html?mod=WSJ_HomeAndGarden_sections_RealEstate

For all your purchase and refinance needs, feel free to contact me at 410-248-1762 or bob.lowery@prosperitymortgage.com. I am available seven days a week.

Confidential applications can also be completed on our secure website at https://www.homeloans.com/bob-lowery

Regards,

Bob Lowery

Home Mortgage Consultant

Prosperity Mortgage Company

410.248.1762 Tel

443.653.1720 Mobile

Bob.Lowery@prosperitymortgage.com

https://www.homeloans.com/bob-lowery