FHA mortgage changes take effect Jan. 1, 2009 for homebuyers

This is part 1 in a series about FHA mortgage loans that affect buyers and home owners in the Eugene and Springfield Oregon area. FHA mortgage lending will undergo several changes on January 1, 2009. Some of them will affect more people than others.

1. The down payment requirement on the FHA 203b and 203c will change from 3.0% to 3.5%.
2. The FHA Secure will go away.
3. The maximum loan amount for Lane County will change from $343,750 to $271,050 for a single family residence.
4. FHA HECM (reverse mortgage) will be available for purchase transactions. Loan amount limit for the HECM will be $417,000, purchase or refinance, in Lane County.
5. Reportedly, builders will no longer be able to steer borrowers to their "in-house" lenders with enticement of paid closing costs they will not give if another lender is used. (This is a change in RESPA but the reading on this is very complex.)
6. This doesn't change, it already did - UFMIP (upfront mortgage insurance premium) changed from risk based premiums to 1.75% for everything except for FHA Secure and H4H and other exception noted below. (15 year term different.)

 At the same time, there are some things that don't change Jan. 1.

1. Streamline refinances UFMIP is still at 1.5% with pro-rata refund on existing UFMIP if loan is less than 3 years old. Streamline refinance are available with or without a new appraisal.
2. The streamline program does not have either the 3% or 3.5% requirement and may be up to 100% loan to value, including UFMIP.
3. Down payment requirements for FHA 203k and 203h do not change from 3% minimum. The FHA Energy Efficient Mortgage is also not effected.
4. Down payment may still be a gift or a qualifying down payment assistance program such as HAP or SHOP. No limit on combined loan to value when using community based second mortgage.
5. Sellers may still contribute up to 6% of the purchase price for closing and prepaid expense (taxes, insurance and interest) costs.
6. Non occupant co-borrowers can still be used to qualify a borrower for income. Credit problems cannot be overcome with a cosigner.
7. Non traditional credit underwriting still available if no credit score is available.
8. 550 credit score and above underwriting available.
9. Double wide and single wide manufactured home FHA loans available. Homes require concrete foundations and tie downs. Pre-1975 (June 15) and homes on leased land not applicable.
10. Cash out refinances are available to 95% loan to value, including manufactured homes.

11. FHA loans are not just for first time home buyers.

Check back later for Part 2 in this series. I intend to share information that is not generally known in greater detail.

authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576