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FHA May LIMIT Seller Contribution-BUYERS NEED MO' MONEY!

By Bridget "Mortgage Mama" McGee

Mortgage and Lending with SWBC Mortgage 410-960-2061 NMLS 196068

February 28, 2012 04:13 AM

FHA May LIMIT Seller Contribution-They are at it again!!

FHA is proposing a rule to limit seller contribution One reason is that they feel that the 6% cap that is currently in place is serving to artificially inflate the appraised value of homes. The new rule will drop the maximum seller contribution from 6% to a maxium of 3% or $6000 whichever is GREATER.

There is also an increase in the annual mortgage insurance premium (also called monthly MIP) by .10% going into effect for loans under 625,500. Over 625,500 there will be a .25 increase. EFFECTIVE FOR CASE NUMBERS ASSIGNED ON OR AFTER APRIL 1st.

Not only will there be an increase to the monthly cost, but the Up Front Mortgage Insurance Premium will increase from 1% to the 1.75%. This number is typically financed into the loan. EFFECTIVE FOR CASE NUMBERS ASSIGNED ON OR AFTER APRIL 1st.

What does that mean for your buyer's? HIGHER out of pocket costs and a HIGHER monthly mortgage payment.

Here's an example assuming a $250,000 home for sale in Baltimore, Maryland.

PLEASE NOTE: The fees noted below are estimates and may not represent the true cost to purchase a specific property. For the actual cost to purchase a home in Maryland, including rates and fees , please contact me directly at 410-960-2061. The 4% rate is for example purposes only. Your actual rate may be higher or lower than 4%.

A REAL WORLD COMPARISON USING:

TODAY'S REGULATIONS AND PROPOSED CHANGES

If you have been pre-qualifed using the current numbers, be sure to ask your lender if the upcoming changes will affect your ability to purchase. Realtors, if you have buyers under contract on short sales, be aware, any delay may mean a buyer that no longer qualifies or needs more money out of pocket.

Is this one more reason to get off the fence and buy today?

If you would like to read and weigh in on the proposed changes click here.

https://www.federalregister.gov/articles/2012/02/23/2012-3934/federal-housing-administration-fha-risk-management-initiatives-revised-seller-concessions#h-15

FHA May LIMIT Seller Contribution-BUYERS NEED MO' MONEY!

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John MacArthur

Century 21 Redwood - Washington, DC

Licensed Maryland/DC Realtor, Metro DC Homes

There may be cause for their concern. Negotiations often include the request to increase the offer amount to offset the closing help. In essence, a seller offers a home for let's say $300,000. A buyer offers $300,000 and asks for $15,000 in closing help. The seller may have anticipated an offer of $291,000 (97% of the list price). The seller then "suggests" that the buyer re-write the offer for $306,000 with the $15,000 in closing help. The buyer is told they will have less money out of pocket and the closing "help" will be financed over 30 years. You're the lender. The buyer asks what the bottom line will be. Their FHA loan has increased from around $275,000 to around $295,300.

Someone will mention, not to worry, the house has to appraise. The appraiser gets the request and does the appraisal. He sees the list at $300,000 and the contract at $306,000. Often, all things being equal, the appraisal will come in.

I don't think that the purpose of closing help is to increase the loan amount of the buyers. It is supposed to be help.

The fast and footloose method of "re-negotiating" with the mentality of don't worry about tomorrow, just get the deal done, has led to more scrutiny.

It does not mean the buyers have to come up with more money. It means that sellers will have to take the deal or wait for a better offer.

Feb 28, 2012 04:55 AM

Andrea Bedard

Thompson Company, REALTORS® 240.593.2860 - Silver Spring, MD

Fluent in Real Estate & German, M.A. ABR ASP CIPS

Bridget, my initial reaction *sigh*! I'm not too concerned with the allowable subsidy going down to 3% - of course it would be lovely to get buyers the 6% but with the inventory going down, competition increasing for the good homes, up to 3% is more the norm.

However, the increase in mortgage insurance is major and I hate it! It likely wont stop there either ... Any info as to when the changes might take effect?

Feb 28, 2012 08:49 AM

June Piper-Brandon

Coldwell Banker Realty - Columbia, MD

Creating Generational Wealth Through Homeownership

Bridget, Ugh... do they really want people to buy homes? I wonder with all the changes in the marketplace. That's a huge change in the amount someone would need to bring to the table.

Feb 28, 2012 10:13 PM

FHA May LIMIT Seller Contribution-BUYERS NEED MO' MONEY!

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Bridget "Mortgage Mama" McGee

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