New FHA Rules
The Federal Housing Administration has announced major changes to it program. The agency will increase the amount of upfront cash paid by new borrowers and require higher down payments from those with the poorest credit.
Upfront insurance premiums paid at the closing table will increase to 2.25 percent of the loan value, but buyers will still be able to finance the premiums. Borrowers with credit scores below 580 will be required to put at least 10 percent down, but home buyers with higher scores will still be allowed to put down as little as 3.5 percent. FHA also plans to reduce seller concessions from six to three percent of the home’s value.
These policy changes come on the heels of FHA’s announcement in October 2009 that its capital reserve fund had fallen below the congressionally mandated level of two percent. Lawmakers believe these changes will help ensure the agency’s financial soundness and fulfill its mission of serving borrowers not adequately served by the private sector.
How will these changes impact the buyers in our area? Reducing the allowable seller concessions from 6% to 3% will likely have the biggest impact on the smaller loan amounts where the borrower needs a higher percentage contributed from the sellers to go towards closing costs. It will have less of an impact on the larger loans.
You can read more in depth regarding these changes here: HUD.GOV