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Changes to FHA in March/April 2010

By
Real Estate Agent with Keller Williams Realty Lanier Partners

Changes to FHA in March/April 2010 :

As many have heard, there will be some changes in FHA lending regulations that WILL impact the home buying market. The changes to FHA regarding seller paid concessions as well as up front MIP costs will be changing at the end of March 2010/beginning of April 2010.

Lenders are already trying to get their buyers under contract and case numbers assigned to properties to keep their current buyers from suffering the consequences of these changes.  Although the changes are not all-negative, they do impact Real Estate agents, lenders, buyers, and sellers this year.

Beginning in April 2010 FHA will:

  1. Change the upfront MIP from 1.75% to 2.25%. (This will affect how much a buyer will need to bring to closing and how much the ask for in seller paid closing costs as will the next change)
  2. Change the allowed seller paid closing costs to 3% from 6%. (This in particular will have the biggest impact on our buyers)
  3. Change FICO scores and down payment requirements for new buyers to a minimum 580 credit score to be eligible for a 3.5% down payment (those below this mark will be eligible for loans with a 10% down payment)

Also: look for down payments to rise as well. We should probably anticipate down payments to go up to 5% for even well-qualified buyers.

Now, FHAhas good reason for making these changes. Like the rest of the world, they ar trying to keep their heads above water during this difficult economic shift. FHA is increasing the MIP in order to increase capital reserves so that they can bring back private lending. This will help our market in the long run. They will also be increasing the annal MIP in the near future, but I do not have an ETA on that change yet.

They are changing the allowed seller concessions to stay within industry standards while also reducing their risk with each loan. They claim that having higher seller paid closing costs gives extra incentive to inflate prices on appraisals.

 All in all, this seems to scream "more difficulty", and "less buyers" to agents, sellers, and lenders. However, we must use our knowledge and expertise to push us through this change, just like all the others. We have to keep in mind and tell our current buyers about these changes so that hopefully they can avoid them by getting under contract sooner. I'm not an advocate of rushing people to buy, but when they have all of the information at hand, you allow them to make the right decision for their family.

If picking a house that is on the market now means A. a lower down payment B. less money brought to the table by the buyer, and C. an $8,000 tax credit from the government... many will choose to go ahead and pick up their pace. I know I would if I were at risk of possibly not having enough money to buy the house I thought I was ready to buy.

Also remind your buyers that interest rates are doomed to go up. I'm no financial expert, but anyone can watch the news and hear that the feds are going to stop buying mortgage backed securities and may actually sell some off as the economic state of the nation improves. This will cause rates to go up if it happens. So make sure your buyers are educated and I would even go so far as to have these conversations with selling agents that show your properties. I would want everyone who could make or break a sale of mine to know what's coming. That way everyone who influences you is educated and hopefully will put their foot on the gas petal when it comes to buying.

So my final message:

Educate yourself, educate your buyers and sellers of the FHA changes, and when you know the buyers are ready, get a contract on the property as soon as possible so that they can lock in their rate with their lender and the lender can get an FHA case number opened. Doing this before March 31, 2010 will ensure that they do not have to suffer the consequences of these changes.

Click here for HUD's Policy Change Announcement

 

For now, happy buying and selling.

 

Brittany Purcell

Success Realty

770-713-4278

www.BrittanySells.com

Real Estate in Athens, Jefferson, & Commerce, GA

Posted by

Brittany Purcell | Associate Broker | Certified Short Sale Specialist | Keller Williams Realty | 706-389-0771 | www.BrittanySells.com

Comments (1)

Carol Fiorillo
Keller Williams Realty Atlanta Partners - Big Canoe, GA

Thanks for the update and the good advice.  As you pointed out, we, our clients and fellow agents need to be educated regarding current changes in the lending arena and the potential impact of future changes and rate increases.

Mar 07, 2010 10:21 PM