Just a few weeks ago, the Federal Housing Administration announced that major changes to its loan programs are on their way. The FHA is very popular right now with close to one-half of Americans using this government program to finance the purchase of homes. These changes will make it harder for the average American to purchase going forward. Here is a summary of the changes:
- The cost of FHA mortgage insurance is going up significantly. The first increase will be for the "up-front" premium and this will be implemented with applications taken after April 5, 2010;
- Those with lower credit scores will be required to put 10% of the sales price down. Presently the requirement is for only a 3.5% down payment and the lower down payment requirement will continue for those with good credit histories. This requirement is to be implemented in early summer.
- Also to be implemented early summer, sellers will be restricted in the amount of closing costs they can pay. Typically FHA has been one of the most liberal programs in this regard as buyers could decrease the cash required through seller closing-cost assistance. Soon sellers will be able to offer assistance up to 3% of the purchase price, instead of the present 6%.
While we understand that the economy is causing many of these changes and they are important to make sure this important program remains sound, we also are concerned that everyone who wants to purchase can do so with as little barriers as possible. This means that if you are interested in purchasing a home, now is the time to act so that you can do so under the present guidelines.
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