New FHA Lending Changes on Horizon

New FHA Mortgage Changes 

Give Home Buyers More Reasons to Purchase Now

Impending changes to to help recapitalize FHA Mortgage reserves will make it more difficult to qualify. These FHA Mortgage changes will further restrict home buyers from obtaining low down payment financing. The final ruling on these FHA Mortgage changes is still being discussed and will be placed into effect between the Spring and Summer of 2010. The key changes will include:

• Changes to the upfront MIP (Mortgage Insurance Premium). It will to be raised from the current 1.75% of the loan amount to 2.25% of the loan amount as of April 5, 2010. This additional premium is targeted to build up the FHA capital reserves. This change will take place with all FHA case numbers issued on or after April 5, 2010. This will add to buyers' monthly payment and loan amount.
  
• Changes to the allowable seller contribution to the buyers costs. It is expected that seller concessions will be reduced from the current 6% of sales price to 3% of the sales price. This changed is aimed at buyers having more of their own funds invested in the property. More "skin in the game" results in lower mortgage defaults. FHA is also concerned about inflating home values through higher seller concessions. This will result in buyers needing more cash to close.
  
• Changes to the down payment required for borrowers with lower minimum credit scores. It is expected that good to excellent credit borrowers will still be able to purchase a home with the current 3.5% required down payment. However, lower credit score borrowers may be subject to a 10% down payment. This again is aimed at less credit worthy borrowers having more of their own money invested in the home.

The clock is not only ticking for the First-Time Home Buyer Tax Credit, but for the new impending FHA Mortgage changes. Smart homebuyers should stop waiting for home prices to fall further before they become victim of the impending FHA Mortgage changes and higher interest rates ahead. They may just find that they don't qualify or have enough money to do the deal.

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