There were changes to policies regarding FHA loans that became effective at the beginning of October of this year. There will be more tweaking as of 1/1/09. There may be even more to come. I thought it might be helpful to review some of these changes for you.
•1) DPAs (Down Payment Assistance) - Seller funded down payment assistance (such as Genesis, Ameridream, etc..) has been eliminate at the lobbying of HUD. There is potential legislation on the table to bring DPAs back in some form. IF it does make it back it will probably have higher score requirements and may be tied to higher mortgage insurance to mitigate any extra risk.
•2) Down Payments - the rule has always been a minimum investment of 3% with 2.25% required as actual down payment (1.25% on homes under $50K). This part is actually unchanged for now but, it will change to 3.5% as of 1/1/09 and it will all be in the form of down payment. This will even further require FHA borrowers to have some source of cash for their purchase. This will still be superior to conforming programs though.
•3) Seller Concessions - this will still be 6%. This is still another nice advantage over conforming programs and is thankfully going unchanged.
•4) MIP/PMI - FHA loans have a portion of their mortgage insurance paid up front (MIP) and the rest paid as part of the monthly payment (PMI). For years it was a standard 1.5% up front and a factor of 0.5% annually divided in to 12 payments. FHA briefly went to a chart utilizing "risk based" pricing. They now have gone back to standard figures. For a purchase of 95% LTV or less the borrower pays 1.75% up front and 0.5% for the annual. If the LTV is above 95% it is 1.75% up front and 0.55% for the annual.
For more information, call Ellie Stafford at 850-545-0814 or email me at ellie@ringtherivers.com.
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