FHA Toughens Down Payment and Decreases Seller Concessions

FHA announced changes (January 20, 2010) in the following areas:


Where's the Money??

* The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
* Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
* FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the upfront premium.
* Seller concessions will be reduced to 3 percent from 6 percent.
* FHA will make the following lender enforcement changes: FHA will implement credit watch terminations at lender underwriting. Public reporting of lender performance through Neighborhood Watch scorecard system will be implemented.
* FHA will implement, through notice and comment, indemnification against lenders through Credit Watch. Indemnification will be expanded beyond fraud and misrepresentation.
* FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
* FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.

To get all the particulars, go to http://bit.ly/7jGECU. The hope is that these regulatory changes will ensure financial soundness and facilitate the housing recovery. Please remember that FHA loans are loans insured against default by FHA.

If you would be interested in buying a home or learning more about FHA loans, feel free to contact me. I look forward to hearing from you soon.

Keeping Focus - How Much Money Can I Spend

The first step in buying a home is knowing how much money you can spend or qualify for based on your income and expenses. Why you need to do this first rather than waiting until you find a house? The reason is straightforward. Today there are a lot of homes for sale. Looking at the homes that you can afford helps you feel confident in your purchase decision.

• Shop your loan. The Dept of Housing & Urban Development did a study in 2008 that revealed that buyers who are able to investigate mortgages themselves come out better than using a mortgage broker. Go to Mortgage Daily News. http://www.mortgagenewsdaily.com/library/mortgage This website is setup in a question/answer format. Pull your credit from all 3 credit agencies. You can pull your credit once a year for free. Look at it and see if there are any items reported that you don’t recognize. You may have to pay for an actual credit score from each credit agency but it’s well worth it. Your credit score determines the interest rate and terms that a lender can offer you.

Please remember that you are shopping for a specific loan. http://homebuying.about.com/od/financingadvice/qt/0507loantypes.htm What kind of loan do you want? Do you want a 30 year, 40 year loan or a 15 year loan? Do you want the rate to be fixed or adjustable? You want every lender to give you the same information. Right now, I would recommend a 30 or 40 year fixed rate loan because the rates are so low.

• Shop for the same type loan with each lender so that you can compare apples to apples. fixed rate mortgage types, fha loans, va loans, combo loans, etc. While shopping your loan, do not give your social security # to anyone unless you plan to use them for a lender. If the person with whom you are speaking seems professional and easy to talk to, setup an appointment with them.

• Know who you are talking to.Get their name, their telephone number, etc. Interview them. Get references. Find out how long they have been doing loans. How long have they been with __________ bank or mortgage company. You want someone who is knowledgeable about the different loan products available.

You need to include local banks, national banks, credit unions and mortgage companies. Shop locally if you can. There are a lot of “fly-by-night” companies that have great web sites but can’t ever seem to get the money to the closing table. Check their references on the internet or call me. "Google" the company and then "google" the name of the person you are talking to. It's amazing what you can find out.

Example of a conversation with a potential lender. “Hello, this is Joe Smith and I am interested in finding out about your 30 year fixed loans. Could you quote me on the best terms for your most credit worth borrower or please quote me on terms for someone who has a _____ credit score?"


The old adage kicks in....if what you see or what you're being quoted is too good to be true, then it probably is.... Call me if you have any questions or contact me by email. Next post will be about "Keeping Focus - My Home Needs to Have..."