Don't Wait to Buy..... FHA Rules Will Be in Effect This Summer.
In my previous blog I talked about why NOW is a great time to purchase. I mentioned two key reasons: The Homebuyer Tax Credit and record low interest rates. Now there is a third reason, NEW FHA standards.
Starting this summer, the Federal Housing Administration is tightening lending standards in an effort to increase its dwindling reserves. These new standards will make it harder for some buyers to buy a home by requiring a higher down payment than the previous 3.5 percent for some borrowers, higher insurance premiums and reduced seller concessions.
FHA-insured mortgages have always been attractive to borrowers because down payments are only 3.5 percent. Where as most conventional loans now require 20 percent down, keeping many creditworthy borrowers on the sidelines.
What will change?
Credit ScoreBuyers
Will have to have a minimum credit score of 580 to qualify for a 3.5 percent down payment. Previously, there was no minimum score. Those with lower scores will have to make at least a 10 percent down payment. The average credit score of FHA-insured borrowers is 693.
Increase in Insurance Premiums
Buyers who get an FHA-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of total loan amount, up from 1.75 percent now. A $100,000 mortgage would require a payment of $2,250, or $500 more.
Seller Concessions Reductions
Sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent. On a $100,000 house this could cost the buyer an additional $2000-$3000.
These new rules give us more reason as agents, to let the consumer understand why there may never be as good as an opportunity, as today, to purchase a home.
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