This has been an interesting week for the mortgage business. FHA has 
announced the forthcoming changes to their lending platform, and some of those will undoubtedly have an impact on the market going forward.
Rates also took a surprise drop down to their lowest levels in months.
In terms of FHA changes, below is a summary:
*FHA Suspends 90-day Flipping Rule - Goes into effect ASAP
This is huge and will likely spur an influx of developers into the market to
buy, rehab, and flip homes now that they can sell to FHA buyers without
having to hold the properties for 90 days. It should mean more available
inventory for home buyers and an easier buying experience in general
compared to bank-owned foreclosures. The waiver is already in effect but
there will be a slight delay while lenders revise their guidelines to
include the new change.
*Mortgage insurance premium (MIP) will be increased by 50 bps to 2.25% - Expected to go into effect this spring.
This may end up being split between the upfront and annual premiums.
Overall this change should not have a meaningful impact on a borrowers
ability to qualify and it's affect on the market will be negligible.
*Down payment will now be determined by FICO score - Expected to go into effect this summer.
New borrowers will now be required to have a minimum FICO score of 580 to
qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. Considering that
it is currently practically impossible to get a FHA loan with a FICO score
under 620, this change should have virtually zero impact.
*Seller concessions being reduced from 6% to 3% - Expected to go into effect this summer.
Of all the proposed changes, this is looking like the most significant. The
net result for many borrowers will be an additional 3% borrower cash
investment in the purchase - effectively bringing the cash requirement
(including down payment) to 6.5%. This can be offset via gift funds which
may be how many borrowers manage to qualify once this change occurs.
*Increase enforcement on FHA lenders - Goes into effect immediately.
Although this is something that has probably been necessary for a long time,
the net results will be unpredictable. Certainly we run the risk of another
pendulum swing as lenders become paranoid about losing their ability to
originate FHA loans and move to over-tighten guidelines. Time will tell.
Please note: There have been changes to conventional loans as well with the maximum debt ratio dropping to 45% (50% with significant compensating factors).
As a buyer, now is the time to have your mortgage pre-approvals re-evaluated if they have not done so since last the new year.
I have been a Licensed Mortgage Broker since 2004 and I enjoy following the mortgage market though the main focus of my personal business is listing homes for sale.
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