Effective April 5th 2010 which is less than 30 days away, the FHA mortgage insurance premium (MIP) will be increased from 1.75% to 2.25 %. If you are considering an FHA mortgage for your new home, this is important news because it will cost you less to get it now. So not only is the $8000 and $6500 Home buying tax credit ending next month, it will actually cost more to get the loan itself. The FHA will seek authority to not only raise the up-front MIP but also the annual MIP as well.
Borrowers with weak credit will be required to pay more upfront, and will 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% ! These changes will be taking place within the next 60 days.
What else?
- FHA loan guidelines will be changed to limit seller concessions. Currently owners can assist home buyers with a seller contribution/concession up to 6 % of the sales price; the current level creates incentives that inflate the appraised values. So contracts that ask for the seller to pay all closing costs will have to regroup. Under the new rules the maximum seller contribution will be reduced to 3 % . This change will bring FHA into conformity with industry standards.
• Lenders will be on the short leash. and will be ranked by performance - and will post the results online. Section 256 of the National Housing Act will allow for lenders to bear the liability for all loans they originate and underwrite. And thus not have it fall back on the Government to bail them out. Additionally, they would have the authority to withdraw originating and underwriting approval for a lender on the basis on their performance. The end result will be: Higher costs for borrowers, more security for the FHA program and fewer FHA lenders.
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