New FHA Rules Taking Effect Soon!
Many first-time homebuyers turn to FHA loans these days. After all, FHA loans have lower down payment requirements, and first-time homebuyers don’t always have a lot of cash to put down. New FHA regulations, while making the business of lending a bit safer for the FHA, will certainly affect first-time homebuyers, who often have lower credit scores and less money.
What is the FHA doing? Specifically, it’s making the following changes:
1) The up-front mortgage insurance premium (UFMIP) will be raised to 2.25%, up from 1.75%, effective April 5, 2010.
2) If the borrower’s credit score is 580 or below, the minimum down payment will be increased to 10% of the purchase price of the home. Note that if the borrower’s credit scroe is above 580, the current requirement of only a 3.5% down payment stands.
3) Sellers can only provide a maximum of 3% in closing cost credits. Previously sellers were allowed to provide up to 6% in concessions (though in practice, this was rare).