Acquiring an FHA home loan is about to get costlier.
The FHA announced a number of policy changes to reduce their overall liability.
It should mean tougher mortgage approvals and higher expenses to secure a mortgage approval for individuals who wait.
FHA is trying to limit their exposure a few areas.
- Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
- Minimum 10% down payments for those with less than a 580 FICO
- Seller concessions are being limited to 3%. This is 50% of today’s 6%.
The FHA in addition has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.
You can see these FHA interest rate comparions at today’s levels and it explains why FHA is doing 30% of the lending these days.
The FHA is trying to keep home loans affordable, but yet manage the risk.
They are also preparing to boost the standard of their providers. They are introducing a “termination clause” to attack the situation where it starts. Should certain lenders represent a disproportionate quantity of the bad loans, they’ll lose their privilege to originate FHA loans.
As a consequence, home buyers should expect tougher FHA underwriting in 2010. This won’t be as much due to the guideline changes, but more as a result of the “termination clause.” For lenders to prevent being the “bad lender,” they will add overlays to insure that they don’t have a disproportionately bad portfolio. Examples of this already exist: The FHA will allow 580 FICO scores, but almost all lenders require at least 620 FICO.
The new guidelines don’t go into effect until spring, but acting now will save the up-front mortgage insurance premium monies plus lock in today’s monthly mortgage insurance payments before those too get more costly.
With the FHA loan rates recovering, this might be as cheap as it gets.
Stay current on all the FHA home loan approval changes on the site.
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