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The FHA has tightened it's lending requirements

By
Real Estate Agent with HomeSmart License # SA577557000

FHA has tightened it's lending requirements in order to maintain their capital reserves and manage risk better.  Here is what a recent article in Realtor Magazine had to say.  They are raising the upfront mortgage insurance premium (effective April 5th), increasing the minimum down payment for some borrowers, and reducing the seller concessions (both to be posted in the Federal Registry in February with a 60-90 day comment period).  The FHA is also seeking legislation to raise the annual mortgage insurance premium above the current level of .55 percent.

What does this mean to the borrower?  

With the upfront mortgage insurance premium going to 2.25 percent from 1.75 percent, it won't affect the amount of cash the buyers will need to raise (it can be financed), but it will affect how much house the buyer can afford.  It could increase their monthly payments by $50 to $100.

The minimum down payment increasing to 10 percent for anyone with a credit score of 580 or less will impact many first time homebuyers who have yet to establish a credit history.  The difference between 3.5 percent and 10 percent on a $150,000 home is an extra $9,750 in down payment the buyer will have to come up with.

The reduction in the seller contribution from 6 percent to 3 percent will hurt the buyers as well, as now they are having to pay much more of their closing costs, like title insurance and the mortgage origination fee.  Buyers may have to come up with another 1 percent of the mortgage amount.

There is a fine balance between providing access to underserved communities, supporting the economic recovery, and maintaining a healthy financial balance for the FHA to thrive and survive.  Let's hope the FHA tightening their lending requirements will not go too far to disrupt this balance of what is good for the economy.
 

Posted by

         Contact Troy Erickson, Realtor®, Good Company Real Estate

Licensed Residential Realtor® in Arizona at 602-295-6807

 

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This post is for informational purposes only and should not be construed as legal advice. If you desire specific legal or tax advice, please consult the appropriate professional. The opinions expressed here represent my own and not those of my employer. Troy Erickson will not be held liable for any errors, ommissions, accuracy, validity, currentness, suitability, completeness; or any losses, injuries or damages arising from its display or use.

Comments (4)

John Pusa
Glendale, CA

Troy - Thank you for sharing an informative and helpful blog.

John

Feb 23, 2010 05:19 PM
Fernando Herboso - Associate Broker MD, & VA
Maxus Realty Group of Samson Properties - Clarksburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

This was necessary if they want to remain in business. . I expect even more tightening  by the end of the year

Feb 23, 2010 09:32 PM
Coldwell Banker Cutting Edge
Coldwell Banker Cutting Edge - Grants Pass, OR
"Your Proactive, Trusted Real Estate Advisor"

It keeps getting harder and harder but there are buyers people always want to buy and sell, we just have to go find them.

Feb 23, 2010 10:27 PM
Troy Erickson AZ Realtor (602) 295-6807
HomeSmart - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

John - Thanks for stopping by and commenting.

Fernando - So they say, but I'm not so sure there isn't a better way of doing business.

Clason - I feel for the people who are doing everything right, and still cannot buy.

Feb 25, 2010 03:22 PM