What was just hearsay and what has actually happened?
A summary of FHA changes since the first of the year, 2010.
The main changes are…
1. 3.5% down payment. This happened last year, actually, from the 3% down mark of previous years. The amount is an extra $500 from a home buyer purchasing a $100,000 home. We didn’t even feel the change – if HUD gets excited about lending $500 less, then I say we let them have this one. The upside is that the payment gets better by $3 to $5 per month.
2. 2.25% Up-Front Mortgage Insurance premium. This used to be 1.75%. On a $100,000 mortgage it means an extra $500 in the loan amount and around $3 to $5 per month more in the payment for a 30 year or 15 year fixed loan respectively. Yes, the increase here exactly offsets the savings in #1 above.
3. The monthly mortgage insurance premium will also increase in certain situations. Right now the monthly amount is .55% per year in most cases, and on a 15-year fixed loan with 10% down, the monthly is not required. FHA intends to add tiers to their Mortgage Insurance Pricing. For lower credit scores, you pay higher MI. For less down, your rate will be higher. For a combination of the two, the rate is higher still. The good news here is that FHA becomes more palatable for more people. If you have good qualifications, then you’ll shoulder less of the cost of the riskier loans. This will be a good move. It has not taken effect yet.
4. Credit score minimums have risen again. FHA estimated that 580 would be the lowest score they would allow. Most lenders, however, have already set the number at 620 or even 640 for some. FHA can sometimes allow for more risk than some lenders are willing to take on. This is one of those areas. See my article on Zillow about increasing your scores with the help of a credit action report.
The following link outlines the main changes that have been proposed by the FHA. We believe that by the end of the year ALL of them will have taken effect.
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
Contact The Mortgage Mark with any questions.
http://www.capitalfmc.com/
mwilkins@capitalfmc.com
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