Catching Up With FHA

The fine folks at Bank of America Home Loans sponsored a very informative class this morning on the complicated business of Federal Housing Administration (FHA) loans. Here are just a few interesting 'takeaways' from that session:

Property Qualifications

The property must be FHA insurable, which excludes manufactured and modular homes built before 1976 and any homes who have substantial 'health and safety' or structural repairs.

"Skin in the Game"

FHA requires that a buyer have 'buy in' (pardon the pun) in the purchase.  They are now requiring a minimum down payment of 3.5%, which can be borrowed or gifted from a relative or 'approved source'.  In addition, the buyer must have at least a 3% cash investment as either part of the down or towards closing and mortgage insurance costs.  The seller can no longer contribute any money towards the down payment and they are now restricted to 3% contribution towards closing costs as a seller concession.

Mortgage Insurance

FHA has increased the amount of Mortgage Insurance Premium required to close (the "Up Front Mortgage Insurance Premium or UFMIP) to 3%, and may increase the annual Mortgage Insurance Premiums with or without decreasing the Up Front requirement in the future (watch this blog for updates if those changes do occur).

Appraisal

When appraisals come in lower than needed, FHA no longer allows for a secondary appraisal unless there are material  deficiencies with the current appraisal, the current appraisal will not be valid on the date of contract ratification (over 120 days old) or if the appraisal is for a Rehab Mortgage (see below).

e-Sign

As of 4/8/2010, electronic signatures (*if ESIGN and UETA compliant) are now accepted.

Special FHA Programs of Note

- Rehab Mortgages (203(k) or Streamlined(k)) allow for the mortgage inclusion of money that is needed for property improvements such as a new roof, carpet, paint, etc up to $35,000 Maximum.

- Energy Efficient Mortgages allow for the mortgage inclusion of money for energy efficiency upgrades and can be combined with other loan packages, including Rehab Mortgages like those above.

- Reverse Mortgages allow for homeowners age 62 and older to convert the equity in their homes into tax-free cash for any purpose.

Keep an eye out for future blogposts on these individual programs and what they can mean for you!

Please see the FHA Website for additional HUD/FHA requirements or for clarification of any of the information provided above.

Special thanks to Sue Lyons, Marketing Specialist for the FHA/Denver Homeownership Center, for her excellent presentation and C.B. Potts Collindale for a fantastic breakfast!