FHA is the best way to go for many buyers. The limits in our area have been raised to compete with conventional loans. For the first time in history, credit scores will be utilized in FHA lending. These important FHA guideline changes will become effective on July 14th, 2008.
Let's take a closer look at the ten primary changes to the FHA guidelines:
1. Borrowers with either no score or at least 500 may only able to borrow less than 90%; 2. Borrowers with a score less than 500 get a maximum LTV of 90%.
3. Borrowers without scores will require manual underwriting.
4. Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score. It will no longer be a flat rate
5. The Monthly Mortgage Insurance will range from .50% to .55% depending on score.
6. The amount of the mortgage insurance as well as the rate is based on the borrower with the lowest score.
7. If one of the borrowers has no score, then the Non-Traditional or no-score credit grade is used.
8. Credit rescoring is allowed to improve a borrower's credit grade.
9. All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
10. Along with purchases, these changes apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.
Full details are available at www.HUD.gov, Mortgagee Letter 2008-16
If you have any questions, please contact me and I will help you sort through this maze and show you how to use creative financing to purchase a home.