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FHA Tightening Lending Standards in 2010

By
Property Manager with Keller Williams Realty Southwest

The FHA, in an effort to protect itself from excessive exposure to loan defaults, is implementing tighter controls for lender approvals on loans.  It's anticipated that these rules will go into effect in the spring or early summer of 2010.  Here is a summary of the 4 major highlights of the new rules.  

Higher Mortgage Insurance Requirements - this change requires that the upfront mortgage insurance premium required of a borrow would be raised from 1.75% to 2.25%.  This is typically for those borrowers who have less than a 20% down payment.

Larger Down Payment -  Only those borrowers with a FICO score above 580 would typically qualify for the low 3.5% down payment.  Those borrowers with a score lower than 580 would need a down payment of at least 10%.

Lower Seller Concessions - This is the money returned to a borrower in exchange for agreeing to a higher home sales price.  This seller concession would drop from 6% to 3%.

Higher minimum FICO score requirements - in addition to needing a minimum FICO score to qualify for the lower downn payment option, it may be difficult for a borrower to even begin the process with FICO scores below 600.  This higher FICO score requirement is not limited to FHA loans, but is being adopted throughout the mortgage industry.

These changes are expected sometime during the summer of 2010.  If you are thinking about purchasing a home and are not sure how these will affect you, now may be the best time to buy.  With these changes taking place AND the first time home buyer tax credit expiring at the same time, in addition to home prices being at historic lows in some places, you may never have this same buying opportunity again. 

Stephen Kendrick is a REALTOR® with Exit Realty Select specializing in the Sugar Land, Missouri City, Richmond, Rosenberg and Katy areas of  southwest Houston.  Call me today if you are looking to take advantage of the first time home buyer tax credit before these new regulations take affect.  Remember, you must have an accepted contract on a home to purchase before April 30, 2010 in order to take advantage of the tax credit.  Call me today at 281-630-5435  to schedule an appointment.    

Comments (1)

Kim Dove
Watson Realty Corp - Jacksonville, FL
Realtor - Jacksonville FL

Who is lending to anyone under 580 anymore? I thought that was gone the way of the dinosaurs. I wonder if the tightening will even help?

Feb 16, 2010 01:50 AM