The mortgage lending landscape changes a lot. Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers that aren't paying in cash.
The loan you get today won't always be the loan you get tomorrow.
Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of "what's coming next".
Recently, we saw this with respect to FHA home loans.
January 20, 2010, the FHA issued a press release with new lending guidelines. Specifically, it announced 3 changes that will be effective starting April 5, 2010:
- Upfront mortgage insurance premiums increase from 1.75% to 2.25%
- Allowable seller concession reduced from 6% to 3%
- FICO scores of 580 or lower are subject to a minimum 10% downpayment
But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums. This is where the rumors started.
Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA's petition.
- Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
- Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing
For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, that doesn't mean that FHA has to stand by its initial projections.
Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and mortgage expensive. These are the facts as we know them today.
Homebuyers should plan accordingly.