Making people and ideas findable
No one likes it when changes to mortgage underwriting make it harder for
working households to secure safe and affordable home financing.
FHA has announced that they may be doing just that. And in fact, have
already begun. The policy changes if/when they come are designed to
shore up the FHA's capital reserves and help the agency do a better job
of managing risk. However, many households will be adversely
affected because FHA Buyers will have to either spend more to
secure financing or scale down what they buy.
What would be worse is for the FHA to imperil its financial health by not managing their risk.
So what changes are they talking about?
1. Raising its upfront mortgage insurance premium to 2.25% from 1.75% - that's been
done already and it can be rolled into the loan amount. But it will affect how much house
they can afford and could increase the monthly payment by $50 - $100 which could have a
big impact on how much Buyers can spend for a home.
2. Raising the minimum down payment to 10% from its current 3.5% for borrowers with
a credit score of 580 or less. It will remain at 3.5% for everyone else.
3. Reducing the permissible seller concessions from 6% to 3%. These seller
concessions are typically used to help buyers take care of closing costs like the mortgage
origination fee. With it limited to 3%, buyers may have to come up with another 1% of the
mortgage amount - typical cost of origination.
If you are considering taking advantage of the depressed property prices and buying a home
in the near future, sooner might be better. Talk to your lender, or call me for contact info to
a few good lenders here in the Indy area.
(Info from Realtor Magazine March 2010)