FHA INCREASING THE STANDARDS FOR OBTAINING A HOME LOAN
America is still experiencing a recording breaking year for foreclosures, high unemployment rate at 10%, strategic bailouts by home owners, and the tax credit ready to expire in a few months. Real estate got us into this hole. Experts admit that real estate has to get us out. However, FHA announced a changes when it comes to a borrower obtaining FHA financing. Do you think these changes are good for America at this point in time? Are we fixing the bigger problem when it comes to the banks? Why does the low man always have to be fixed? FHA loans are to assist people in obtaining their home.
Here are the new changes:
- Mortgage Insurance Premium upfront cost will increase to 2.25% from 1.75%
- Borrowers must have a minimum of 580 credit score to qualify for 3.5% down payment program or they will have to put down 10% if below 580 credit score
- Sellers will only be allowed to contribute up to 3% towards buyers closing costs not 6%
There are several reasons for the above changes. First, FHA was ridiculed for not having enough money to operate a couple months back. So, the FHA Commissioner raised the MIP to bring in more revenue to FHA to it will be solvent. Furthermore, FHA wants to see more "skin in the game" when people purchase a home. That means they want the buyer to put more money into the transaction so it will lower the default rates on FHA loan. FHA is not a lender but it does insure the loan. Also, they wanted to see less seller concessions in order for the borrower to get into the house. Personally, I think 3% seller concessions is more than enough to close a deal.
Finally, I am sure we will see more changes come from FHA as the year evolves. Will people still purchase homes after the tax credit expires? Yes, people will always buy and sell real estate as they have done in the past. One must be ready for all things.
I just wanted to mention that The Lending Company offers 1.5% loan programs for buyers interested in purchasing a home. Please email me at harry@deliateam.com for further information on their home buyer financing programs.
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