The Federal Housing Administration, which is supporting the housing market by insuring thousands of new mortgages every day, is expected to announce on Wednesday that it is tightening standards.
Yes, its that time again folks. FHA is making changes that will affect the housing industry, once more. As most already know the mortgage industry is rapidly and constantly changing, so the news does not come as no surprise. However the devil is in the details! As to how it will all play out in the end will be left to be seen.
The changes are going to attempt to hold lenders who participate in the F.H.A. program more accountable by publicly reporting their performance rankings. This will help consumers know who they are dealing with and will provide them with a report card of the lender. The new measures also aims to preserve the agency’s budget while also filterig out borrowers who are not yet fit or stable to purchase a home.
As you may have heard FHA has become under fire lately, largely due to recent controversy of it’s ballooned size and it’s short reserves which plummetted to .05%, far below the Congressionally mandated 2% requirement. Since December, FHA insured 5.8 million loans on single-family residences totalling a loan balance of $750 billion. The shocking part was that more than half a million of the loans were seriously delinquent and heading toward foreclosure.
Most of the program has been left utouched, however the changes are significant in how it will adversely affect the real estate market this year.
The new changes:
FHA UFMIP – Upfront Mortgage Insurance Premium
Borrowers who look forward to an F.H.A.-insured loan will soon be paying a higher initial insurance premium.
- The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.
FHA Seller Contribution
Beginning this summer, sellers will not be able to offer as much help to buyers to pay their closing costs.
- Maximum seller contribution will drop to 3 percent of the value of the property, from the current 6 percent.
Minimum FICO – Credit Score
Previously, there was no minimum score. But this rule might have little effect. For the most part, lenders have imposed their own overlays and mostly require a minimum FICO score of 620 as an industry.
- Borrowers who want to put the minimum down will now be required to have credit scores of at least 580, a relatively poor figure.
ABOUT TED CANTO
Ted is an experienced Mortgage Advisor for the last 13+ years and is also known for his mortgage commentary and internet workshops within the real estate community. Also known as "The Mobile Mortgage Pro", Ted has honed the power of the smart phone, laptop, tablet computing, text, email and social media to ensure that he is always accessible to his clients' “wherever, whenever” to meet their needs. Ted has helped thousands of families finance their new home or refinance their current home in the Arizona and California market. Call, text, or email him to discuss your home financing @ 480.650.8602 or ted@tedcanto.com
Ted Canto
