We knew it was coming and had a pretty good idea of what the changes to the FHA program were going to be, but it is official as of today. The news for home buyers is not good.
Commissioner David Stevens announced the changes to the FHA program. Here they are:
1. Up front Mortgage Insurance Premium, also known as MPI, will go up from 1.75 to 2.25%.
2. Borrowers will need to have a minimum of 580 FICO score to qualify for a 3.5% down payment. If FICO score is lower, home buyers using FHA will need to come up with 10% down. [Probably not a bad idea… agree with this one!]
3. Seller concessions can only be 3% of selling price vs. the previous 6%. [Now… that’s a biggie! The government wants you to have a larger stake in the house, by putting more of your money in it! However, anyone getting a conventional loan has to follow the 3% guideline.]
Please note that FHA does not lend money, they insure loans. A home buyer can get an FHA loan from Wells Fargo, Bank of America – nearly any lending institution.
Recently FHA has been used more often in Pasadena California as many first time home buyers are taking advantage of low interest rates, tax programs and lower home prices.
Additional Reading: Real Estate 101 – what every home buyer should know.