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Important news for New Jersey Home buyers… Big FHA mortgage changes soon to be in effect.

There were big changes announced by FHA this week, aimed at strengthening their capital reserves and at minimizing risk…..

1. Effective April 5, 2010, the up front Mortgage insurance premium (MIP) will be increased by 50 bps to 2.25% (from the current level of 1.75%.)

2. FHA plans to request legislative authority to increase the maximum annual MIP.
If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.

3. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

4. Reduce allowable seller concessions from 6% to 3%.
This change will bring FHA into conformity with industry standards on seller concessions. and will minimize incentives to inflate appraised value.

 
I personally think this is great. Appraisals will no longer be such an issue from large seller concessions,  and if a borrower’s FICO score requires them to put 10% down, that is actually protection for the buyer if the market drops further or even if the market stays flat and the buyer needs to sell within a year or two.  Your thoughts?

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This entry was posted on Friday, January 22nd, 2010 at 7:57 am and is filed under Mortgage Industry News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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