FHA Loans - Some rumors are now reality - Important information about FHA mortgage changes !!!

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FHA Loan rumors now become a reality – So what happened?


fha loans & fha mortgages

Wow... I just talked about some rumors that have been floating around for months about FHA loans. Let me make something clear. They are rumors to me until they are officially stated through HUD/FHA. And on that note, they are also rumors when you read blogs that actually state that they happened already, when it was still in discussion. Here is what I said yesterday.

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

In our ever changing world of mortgages in the last several years, FHA made a few changes that were announced today, but there is no concern to panic, at least in my opinion. You can read it directly on HUD's web site.

FHA Announces Policy Changes to Address Risk and Strengthen Finances





*** The FHA Loan changes as of January 20, 2010 ***


So what are some of the major changes or possible changes in the near future and what impact could they have on the average homebuyer? (4 changes below)


  • FHA Upfront Mortgage Insurance Premium - Known as UFMIP - This is what gets added to your loan amount after your down payment is subtracted from your purchase price or your base loan amount of what you are refinancing. The old amount was 1.75% for purchases and refinances and 1.50% for all FHA streamline refinances. It will now be raised to 2.25%. HUD is also requesting that Congress increase the annual premium, which is your monthly mortgage insurance. Currently it is .55% and .50%, depending on your LTV position. This change will not take place until the spring. (more on this below)

Example of the UPMIP change - Sure, it will hurt some, but that extra 1/2% on the total does not change the payment as much as you think it does. On a $300,000 loan, you are talking about an additional $1,500. This equates to an additional $8 per month.- Not much to disqualify someone, depending on how high their debt-to-income ratio was initially pushed.


  • FHA credit score and downpayment changes - As mentioned yesterday, FHA mortgages never had a FICO score (credit score) number. It still doesn't and here is where the rumors went wrong.  FHA has raised their credit score requirement for 3.5% downpayments to 580. Previously, you needed to have a credit score of 500 or higher. I will talk about this difference in change tomorrow in Part 2. This change will not take place until early summer.

  • Reduction in allowable seller concession from 6% to 3% seller help -  Just basic mathematics... the buyer won't be able to get more than 3% from the seller to pay for their closing costs and pre-paids. This change will not take place until early summer.


  • More awareness of FHA lenders perfromances - Basically giving the public more information and more access to this information. This can be found in # 4 under the new policy changes. New FHA policy changes





So why the changes and what do they do to you, the borrower?


As many of you know, HUD has been suffering major losses within their mortgage insurance pool. HUD just insures these loans. This is the money that is collected from the UPMIP and the annual monthly mortgage insurance (MMI). Here is some food for thought. HUD states this. "This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing."


FHA gets the Upfront Mortgage Insurance Premium (UPMIP) from the lender very quickly after the loan closes. This is upfront cash. But they want to shift some of this weight to the monthly mortgage insurance, claiming that it will reduce the total monies to the borrower. It is hard to argue this until we know what number they want to increase the monthly fee to. Once I know what the new percentage is, I will write a blog in regards to this shift to the MMI that in my opinion is smoke and mirrors. I will explain more in that blog.


Why change the credit scores to include a higher downpayment if you have a score below 580?  This basically allows FHA to balance its risk, yet still give anyone the chance to obtain a FHA mortgage. But keep in mind, they would need 10% down. I will be talking about this in part 2, giving you a better understanding of how hard these types of loans will be to obtain and why.


Lastly, lowering the seller concession from 6% to 3%. This has been a long standing discussion that appraisal values were raised to cover the additional expenses to the borrower, allowing the seller to pay for them. This effort also tries to keep those agreement of sale contracts from changing to a higher purchase price, just to cover such costs as mentioned above.



Keep in mind, there will be a new FHA mortgagee letter that will be out officially tomorrow, giving more detail.....and that this is not 100% official until the mortgagee letter is published. And as mentioned, the next step for HUD is to get congress to act on increasing the annual monthly mortgage insurance, which is known as MMI.




Important Reminder – be very careful of what articles you read about FHA loans. Several articles came out late yesterday, before HUD posted their own information. I have already read one article that was missing 1 of the 4 changes. And one article was giving bad opinion and advice, in my opinion, based on their lack of knowledge and experience in the mortgage industry. Keep in mind, they are just journalists trying to get some sort of news to the public as soon as. The new mortgagee letter will be out tomorrow. – 1/21/10



FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

FHA Loans Rumor Alerts - You don't need 10% or 20% down & more about credit scores - Part 2 of 2 (not truly all about part 2, but I do go into discussions about the credit scores - because of the recent FHA changes, I didn't get into great details about 10% or 20% down)




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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!



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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Re-Blogged 19 times:

Re-Blogged By Re-Blogged At
  1. Marcie Purcell 01/20/2010 08:10 AM
  2. Brian & Marie Spray 01/20/2010 08:14 AM
  3. Karen Tobler 01/20/2010 08:51 AM
  4. Mark Watterson 01/20/2010 10:22 AM
  5. Damon Gettier 01/20/2010 11:36 AM
  6. Roland Woodworth 01/20/2010 03:17 PM
  7. Michael Crawford 01/21/2010 01:28 AM
  8. Jim McCormack 01/21/2010 02:05 AM
  9. Jeanean Gendron 01/21/2010 02:26 AM
  10. Sedruola Maruska 01/21/2010 02:31 AM
  11. Kerry Jenkins 01/21/2010 04:46 AM
  12. Brian Burke 01/21/2010 05:10 AM
  13. Andrew Trevino 01/21/2010 06:31 AM
  14. Deborah Grimaldi 01/21/2010 06:37 AM
  15. Mike Jones 01/21/2010 09:42 PM
  16. 1~Judi Barrett 01/22/2010 12:32 PM
  17. Larry Brewer - Benchmark Realty llc 01/23/2010 04:34 AM
  18. Dana Devine 01/25/2010 02:45 AM
  19. BethAnn Long 01/25/2010 02:52 AM
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fha loan guideline changes
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Mark Towler
Southeast Mortgage - Atlanta, GA

First off, I have to admit I did not read every post above mine, so I hope I am not being redundant. I believe the seller concessions going from 6% to 3% are going to be a bigger deal than the new upfront MIP. If someone is buying a $125,000 home, then they need some concessions to cover their prepaids because they just don't have that much money (generalization). A small loan amount will eat up the 3% SC and this will mean more money out of the borrowers pocket at closing.

As far as the 580 score, I would not even waste my time trying to place that loan. I don't know of any lenders who will go that low. Just because FHA has a guideline does not mean that lenders are not being more strict than HUD.

Jan 21, 2010 08:47 AM #68

Jeff, my understanding is that these are proposed and will probably be implemented but will be posted to the Federal Registry in February and thereafter there will be a comment period and should become law in early summer.

Jan 21, 2010 09:04 AM #69
Cari Anderson
Danville, CA

Agreeing with the post above: the 580 score loans just aren't there. We have one investor that will do them but the pricing is prohibitive (for good reason). It's our hope that the larger down payment requirement may bring more investors willing to do these since there's more skin in the game. But we're not holding our breaths!

Jan 21, 2010 09:25 AM #70
Wendy Rich-Soto, Realtor/Broker Associate
Keller Williams Realty, LA Harbor - San Pedro, CA
Getting you to your next with a zero failure rate!


If that reduction in seller concession allowable doesn't get buyers off the fence nothing will!


Jan 21, 2010 09:44 AM #71
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


FYI – I will get back to everyone’s comments by tonight and answer some questions that were asked…  keep in mind, the new Mortgagee Letter was released today and I will be writing a new blog on this tomorrow. It will be about how we might be able to make a change in regards to the possible seller concession change that has been mentioned.  This blog was based on what HUD released the day before, talking about the possible changes to come. thanks



Jan 21, 2010 10:01 AM #72
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Great changes, and for the better.  I've never liked the 6% concessions as I don't believe buyers should be buying houses with no money, so I'm happy about the lowering of this amount.

Jan 21, 2010 12:06 PM #73
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


DAVID... . comment # 40... .  my pleasure and I am glad I can sometimes simplify things. I hope to have part 2 our by tomorrow with updates about these changes.  thanks

REBECCA.... . my pleasure and I hope it's useful to the other agents.

CAROLYNN.... . even this post could be expressed slightly as the cart before the horse. Even though HUD mentioned these changes, after today's mortgagee letter, a few things will be voted on after public commenting. But as I stated in this post, such changes would be made in the spring or early summer. I will explain some of these changes in detail tomorrow with some examples.. And yes, don't get me started about the media.   Hey all of you media outlets, I am pissed !!!  thanks

VANESSA.... . thank you very much.. I enjoyed breaking stuff down such as this... thanks

WILLIAM.... . my pleasure.. yes, it does feel that way.  And I have some food for thought to what has happened and why... and will be expressing my opinion about this tomorrow.  thanks

LYNN.... . my pleasure and thanks for the continued support.

JEFF..... . comment # 46... . my pleasure and thanks for the kudos in regards to putting this on your first time homebuyers site...


Jan 21, 2010 04:03 PM #74
Jeff Colby
OmniQuest Media Labs - Obeo Distributor - Omaha, NE

Thanks for taking the time to blog about the changes. Your work is very much appreciated.

Jan 21, 2010 08:21 PM #75
Debbie Cook
Long & Foster Real Estate, Inc - Silver Spring, MD
Silver Spring and Takoma Park Maryland Real Estate

Thanks for the "heads up" on all of this.  Looks like the first 6 months this year will be the time for sellers and buyers to make all the hay.  It seems like all the new FHA rules combined with the expiration of the tax credits this spring will have the market falling off a cliff the last half of this year ???!! 

Jan 21, 2010 09:45 PM #76
Gary Pike
Better Homes and Gardens Real Estate Metro Brokers - Powder Springs, GA

Really appreciate the information.  Looking forward to your next post.

Jan 21, 2010 10:43 PM #77
Jerry Gray
Wilkinson ERA Real Estate - Winston-Salem, NC
Serving the Triad Since 1980

I have used the points to get the rate down. My thinking is this provision will hurt in the long run.



Jerry Gray CRB,CRS,GRI,SFR / Allen Tate Realtors / Winston Salem, NC / 336-918-2433

Jan 21, 2010 11:53 PM #78
Bob Sweazy
Prudential A. S. de Movellan Real Estate - Lexington, KY


Thanks for the update. Very concise.

Jan 22, 2010 12:41 AM #79
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


MAMIE... . comment # 47... . I plan on talking about this in my Part 2 section... and I did mention briefly bank overlays in this blog post or in a comment..  FHA loans rumors alert.. Overall, I will be writing in more detail about the lower credit scores also... if I don't have it done by Friday, it will be done for Saturday... thanks and thanks for the compliment.

LEE... aka the full service loan officer... . thank you very much for those kind words...  another 5 or 10%... not sure.. keep in mind, some of these changes are still not official... HUD will allow for public comments and debate on their registry....  hopefully we as a community will have an impact on this. I will be writing about this later today and give updates to when it is opened so we can comment.. thanks

BEN.... . thank you very much for the kind words... much appreciative.. and yes, it is. that is where my passion lies when writing these posts and just doing mortgages in general.. thanks

PERRI... . thank you ver much with respect your comment.. and how we can help. Please read my comment above you, to Lee...comment # 48... thanks and let's do this together. Stay tuned for my updates on this.

JAMES.... . comment # 51... . thanks for the compliment. I will though semi disagree about FHA making loans to people with debt and no money is not a good idea. They have been doing this since 1934... and it's the economy and unemployment. FHA is being hit hard for two reasons.... the increased volume of FHA loans in the last 2 years.. and I can debate that late in my detail.. about who is doing these loans... example.. people that use to focus on subprime loans... and secondly... that HUD should had made some of these changes sooner... but I will talk about this in my next 2 blogs... thasnks for you input.

LISA.... .  my pleasure... and yes, I have heard about this in other markets... why? for a few reasons... the increased loan amounts.. values dropping... and more FHA awareness from loan officers that where even afraid of FHA loans and more consumers hearing about them and or going to the right loan officers... that know all loan programs... thanks

MELISSA.... . my pleasure and I hope this helps more borrowers... 1st time buyers or not.. the real estate professional and yes, some loan officers.  thanks

GENE.... . comment # 55. ... . sorry to hear... but if you are selling homes like this, it shouldn't matter. But if sellers are only accepting offers with larger down payments,yes, this could hurt the first time home buyer that is relying on FHA and the minimum down.. even if that buyer is qualified..  this is where you and I come into play as professionals... explaining this in detail and educating everyone.. way too many assumptions still out there... thanks


Jan 22, 2010 03:40 AM #81
Richard Johnston
San Fernando Valley - RE/MAX Grand Central - Sherman Oaks, CA

Thanks for the information.

Jan 22, 2010 07:12 AM #82
Paul Silver
Tiverton, RI
Rhode Island full service real estate firm

As usual, great information Jeff... I look forward to the other posts to follow...

Jan 22, 2010 07:54 AM #83
Lisa Marie Flenoury
"Lisa The Broker" - Playa Vista, CA
"Lisa The Broker" - Making Dreams Come True

Thank you for taking the time to post.  Its very helpful.

Jan 22, 2010 03:53 PM #84
Larry Brewer - Benchmark Realty llc
Benchmark Realty LLc - Nashville, TN

Jeff - Thanks for the summary I liked it so much, I reblogged it.

Jan 23, 2010 04:37 AM #85
Beverly Femia
BlueCoast Realty Corporation - Hampstead, NC
Broker Realtor Stager - Greater Wilmington, NC Are

Thanks for keeping us updated!

Jan 25, 2010 12:58 PM #86
Dana Devine
Charles Rutenberg Realty - Apollo Beach, FL

thanks 4 the warning

Jan 29, 2010 06:54 AM #87

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Feb 17, 2017 07:44 AM #88
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