Buyers and real estate agents alike should note changes implemented this week in the Federal Housing Authority’s mortgage loan program. In short, those changes include increasing the mortgage insurance premium, updating the combination of FICO scores and down payments for new borrowers, reducing the amount of allowable seller concessions, and significantly increasing lender enforcement.

Mortgage insurance premium
– Increase in initial insurance premium from 1.75 of the loan value to 2.25 percent of the loan value.

Downpayment and credit score requirements
–Buyers with a FICO of 579 or lower will be required to have at least a 10% downpayment.
–Buyers with a FICO of 580 or above will be required to have at least a 3.5 % downpayment.

Allowable seller concessions
–Reduced from 6% to 3% of the property value.

Lender enforcement
–Lender performance rankings publicly reported.

What HASN”T changed
–FHA mortgages are available to more that just first-time homebuyers.
– Sellers may still contribute up to 6% of the purchase price for closing costs and prepaid expenses (taxes, insurance and interest).

“We have known for a while that FHA would be tightening up their guidelines due to the higher percentage of defaults of FHA borrowers with lower credit scores,” said William Haddad, president of Capital Mortgage Solutions in Indianapolis. “These FHA adjustments will make it tougher for borrowers with lower scores to get the higher “Loan-To-Value” loans, and will increase the FHA requirements to be more in line with conventional guidelines that penalize lower scores.”

Haddad adds that REALTOR®S should urge their “on-the-fence” FHA buyers to move forward before these changes become effective in a few weeks.

For more information on FHA and other mortgage loans, contact:

Pat Haddad, ABR, CRS, e-Pro, GRI
Haddad Team, Keller Williams Realty
317.840.7555
Pat@HaddadTeam.com

Indianapolis real estate