FHA Announces Numerous Changes

• January 20th 2010

by Mark Wellborn

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The Federal Housing Administration (FHA) announced a series of changes that are aimed at replenishing its dwindling reserves, and unfortunately those changes will likely upset many prospective buyers who had hoped to use the loan to buy their first home.

Here are a few of the changes:

• Beginning this spring, the up-front insurance premium that borrowers pay at closing will be increased from 1.75 percent to 2.25 percent of the overall value of the loan.
• If you have a good credit score, you will still be able to take advantage of the low 3.5 percent down payment that is offered with FHA loans. However, starting in the summer, borrowers with a credit score below 580 will have to plunk down at least a 10 percent down payment.
• The amount of money that sellers can kick in for closing costs will be reduced. Currently, the FHA allows sellers to pay closing costs up to 6 percent of the sale price of the home. The change expected this morning will reduce the cap to 3 percent.

The changes are much needed. As the low down payment loans have grown tremendously in popularity, the FHA has seen its reserves steadily drop. FHA head honcho and former head of Long & Foster Dave Stevens alluded to the severity of the situation and the need for a change in policy in a recent statement:

“Striking the right balance between managing the FHA’s risk, continuing to provide access to under-served communities and supporting the nation’s economic recovery is critically important.”

This article originally published at https://dc.urbanturf.com/articles/blog/fha_announces_numerous_changes/1695.