Locking down an FHA mortgage loan is about to get costlier.

The FHA announced a few policy changes to cut back their overall exposure.

It will mean tougher mortgage approvals and higher charges to secure a home loan approval for you if you wait.

FHA is trying to limit their exposure a few areas.

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum 10% down payments for those with less than a 580 FICO
3. Seller concessions are being limited to 3%.  The current caps are 3% higher.

The FHA has additionally appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

  You can see these FHA interest rate comparions at today’s levels and it explains why FHA is doing 30% of the lending these days. 

  They’re in a spot where they need to balance their mission of assisting home ownership and remaining financially solvent.

On top of that they are preparing to improve the standard of their loan providers.  They are introducing a “termination clause” to address the situation where it starts.  Should certain lenders represent a disproportionate quantity of the bad loans, they’ll lose their privilege to originate FHA loans.

As a result, home buyers should expect more complicated FHA underwriting in 2010.  This won’t be as much due to the guideline changes, but more because of the “termination clause.”  For lenders to avoid being the “bad lender,” they will add overlays to insure that they don’t possess a disproportionately bad portfolio.  Examples of this already exist:  The FHA will allow 580 FICO scores, but nearly all lenders require a minimum of 620 FICO.

The new guidelines don’t go into effect until spring, but acting now will save the up-front mortgage insurance premium monies plus lock in today’s monthly mortgage insurance payments before those too get higher priced. 

  A nice FHA interest rate rally may have brought down costs right before everything gets more expensive.

Stay current on all the FHA home loan approval changes on the site.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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