While have not seen anything official yet, just wanted to give a heads up about tighter restrictions on FHA loans. The good news is that at this time, it appears the 3.5% downpayment will remain in tact, which is wonderful for our market.
The Federal Housing Administration (FHA), which is supporting the housing market by insuring thousands of new mortgages every day, is expected to announce that it is tightening standards.
Borrowers who get a FHA insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent. See the following:
Starting this summer 2010, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.
Left largely untouched by the changes is the most controversial aspect of the agency's program: a provision allowing buyers to make a down payment as low as 3.5 percent.
Borrowers who want to put the 3.5% minimum down will now be required to have credit scores of at least 580, a relatively poor figure. Previously, there was no minimum score. A credit score below 580 will have to at least 10% down. But this rule might have little effect. The agency says that in practice, new borrowers already have much higher scores.
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