Don't spend your income tax refund - you're going to need every penny of it to purchase a home with the new FHA guidelines in force.

Real Estate Agent with Keller Williams Realty - Lakeside Market Center

Just as we suspected would happen, FHA has now had some major changes and it is now going to cost you more out-of-pocket money to purchase a home.

            New - Sellers concessions are limited to 3% of the purchase price.

            New - Upfront mortgage insurance premium is increased to 2.25%.

Here is an example of what the lower sellers concessions to the buyers will look like for you:

If you are purchasing a $50,000 home the seller will only be able to  contribute $1500 to help you with closing costs, pre-paid items and/or tax prorations.   (This same purchase before the new FHA guidelines  would have meant $3000 in help to you.)

Many of you are thinking of using your income tax refunds to help you purchase your first homes this year.  Often you think that it will be more than enough money with some extra for furnishings, repairs, etc.  That may not be the case anymore.  You may need every last dime of that  refund for your FHA down payment (3.5% of the purchase price) PLUS money for closing costs and pre-paid items.

When you receive your income tax refund tuck it away in your savings account. Have a conversation with your mortgage lender about how much you will need to bring to the closing table for that new home purchase.  Save every penny that you can - you're going to need it.

Comments (8)

Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

HUD is definetely putting a lot more restrictions for buyers. . but I feel this is a good start

Jan 23, 2010 11:19 PM
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

While a majority of my clients use FHA loans this is going to hurt my business. Cold hard cash is a rarity it seems.

Jan 23, 2010 11:20 PM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Fernando,  it may be a "good start" for some areas, but for my neck of the woods it is going to stall our housing recovery even further.  My prediction only...

Laura,   It's going to hurt here also.  Greatly so.

Jan 23, 2010 11:32 PM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Kris - Although the intentions of FHA are good, it will certainly make it tougher for that first time homebuyer !  I expect to see a slowdown in the market as a result mid-year on. 

Jan 24, 2010 12:06 AM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

The increased cost and reduced allowed seller concession will make it more of a challenge for some.

Jan 24, 2010 12:13 AM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate


I understand that some of these changes are required by law. I do agree with you though, its going to have a chilling affect on some markets.


Jan 24, 2010 01:24 AM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Kris, It's a shame to hear anything that will make it more difficult for first time homebuyers.  Especially with some wonderful deals on the market. 

Jan 24, 2010 07:45 AM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Christopher and Stephanie,   In my opinion they should have raised the upfront premium last year, and then everything else that has been changed wouldn't be necessary.  It's going to be fun..

Gary,  It will indeed.  For many..

Richard,   I understand that, with the exception of the decrease in allowable sellers concessions.  That one I don't "get".

Carole,  It's going to be another set of hurdles that first time buyers don't need right now.

Jan 24, 2010 10:15 PM

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