FHA Loans are getting tougher
Next Monday, April 5th, the FHA guidelines get tougher. The upfront Mortgage Insurance Premium (MIP) will go from 1.75% to 2.25%. In addition, the maximum seller contribution will be reduced from 6% to 3%. On the other hand, FHA now allows 2-4 unit condos and 50% owner occupied and 50% presale as of February 1st.
FHA Commissioner, David Stevens, does not believe raising the minimum down payment from 3.5% to 5% is a good idea. Mr. Stevens believes it would shut out too many prospective buyers/borrowers. I hope his perspective prevails. However, changes have been adopted requiring a 10% down payment from those with a credit score below 580. The standard minimum credit score for a 3.5% down payment is 640.
Currently 1 out of 6 FHA mortgages are delinquent so it is not hard to understand the changing guidelines. However, FHA still provides lower interest rates, streamline refinancing, and offers a higher back end ratio of 50%.
So what do you think? Will the recent migration to FHA loans begin to slow down with the new guidelines or will FHA continue to provide enough of a competive edge for home buyers?
At Buyer’s Choice Realty we believe home buyer agents need to be aware of competitive loan opportunities for home buyers. We are happy to talk to consumers about it and to bring in experts to help with lending advice.
Ronn@BuyersChoiceRealty.com 800-252-8937