There have been many rumors flying around regarding the expected adjustments to the FHA loans provided. Do you want to use FHA financing due to the lower down payment requirements, experiencing some credit issues and or wanting to ask the seller to contribute up to 6% concession? If you are and are counting on utilizing FHA loan products for the purchase of your new home, but aren’t quite ready to get off the fence…You may want to re-think your current position.
Per a recent article in the Chicago Tribune –
FHA-insured mortgages have become the loan of choice — realistically, the only option available since the private mortgage industry’s problems arose — for consumers who are eager to purchase a home but don’t have a significant down payment or stellar credit history. Currently, borrowers have to make at least a 3.5 percent down payment and have a minimum FICO credit score of 500, but most participating lenders require borrowers to have a score of 620 or higher.
Those lending requirements have meant a banner year for the FHA. It has insured almost 30 percent of home purchases — more than 75 percent of which are to first-time homebuyers — and 20 percent of mortgage refinancings. Just three years ago, the FHA’s share of the mortgage market was 3 percent.
Among the steps outlined by Housing and Urban Development Secretary Shaun Donovan in congressional testimony Wednesday were plans to increase the down payment and FICO score required. The agency also may ask Congress for permission to increase either the upfront mortgage insurance premium, the monthly premium or both. Details of the plan are expected next month.
“We have made the decision to exercise our authority to increase the upfront cash that a borrower has to bring to the table in an FHA-backed loan — to make sure that FHA borrowers have more ‘skin in the game’ and a stronger equity position in their loans,” Donovan said in written testimony submitted to the House Financial Services Committee.
One detail Donovan did provide is that sellers would be able to help buyers with only 3 percent, rather than the current 6 percent, of “concessions” that help fund closing and loan-related fees.
The moves are part of a plan by the FHA to lessen risks to its portfolio; an independent actuarial study found the agency’s insurance fund reserves have fallen far below the congressionally mandated minimum. The agency also plans to take steps to increase FHA capital and to hold lenders more accountable for the quality of loans they write.
This may be the time to get off the fence..
Please feel free to contact me with any questions you may have. I will be happy to assist you in the purchase of your new home. I can be reached at Julie@phoenixpowersearch.com or 480 628 2967
I look forward to hearing from you!
Chicago Tribune Article
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