The FHA, who lately has originated almost a third of all home loans, is overhauling its system come April 5th of this year. Why would this be done when its loan program is so successful, so popular? Mostly this is being done in an effort to bolster it’s balance sheet and falling capital reserves. In other words, the FHA is attempting to position itself better to ”manage its risk while continuing to support the nation’s housing market”.
Unfortunately this also means that it will become increasingly more difficult to secure an FHA loan. Ugh. So without further ado, here are the changes:
Maximum seller contributions are reduced from 6 percent to 3 percent
An increase in Upfront Mortgage Insurance Premiums from 1.75 percent to 2.25 percent
A Congressional request to increase monthly mortgage insurance premiums even higher
The good news is that the biggest expected change (the proposed increase for the FHA minimum downpayment) didn’t make the final cut. Luckily this means you can still get into a home with 3.5% down. Whew.
Also, the FHA’S NEW GUIDELINES institute a minimum FICO score of 580 to make this 3.5% downpayment, while requiring 10 percent down for any applicant whose credit score falls lower than this. That being said, just because they say they will accept a score of 580 doesnt mean the lenders will too. Individual underwriters, who are often more strict, will probably look to your file with much more favor if your FICO score is at least 620. Just FYI.
Overall, the trick to securing a solid FHA loan will be finding the perfect bank or lender for your particular situation. As always, you can CONTACT US and we will review your requirements and find the best loan for you. One of the benefits of working with us (as Brokers) is that we work with over 70 banks, and we can often find the best lender for your case!
