FHA has taken a big hit in recent years, just as many mortgage organizations have. In order to remain healthy, they have decided to implement some changes in the FHA regulations that will make it a little tougher for borrowers.
The change with the biggest impact, in my opinion, is that borrowers with a credit score under 580 will need to have 10% down - which will make it impossible for some borrowers to purchase a home. Anyone with higher than a 580 credit score can still have a 3.5% downpayment.
Another major change is that the upfront PMI payment will increase from 1.75% to 2.25%. Since most borrowers finance this payment, the impact will be fairly small, in my opinion. For example, for a $300,000 contract price, there would be an additional $1500 financed, which would mean that the monthly payment would increase by $8-$9 per month, assuming an interest rate between 5-6%.
Additionally, the maximum seller paid closing costs will be reduced from 6% to 3%. This could have a large impact in some cases because it could increase the amount of upfront cash that the borrower will need. However, for price points that are typical in Northern VA, 3% should cover all of the borrowers closing costs so that they will only need to bring the downpayment to closing. For borrowers whose reserves are very tight, I might recommend waiting and saving heavily.
Overall, I think any changes that lead to stricter guidelines are good. It is not good for real estate sales, but I truly believe it is good in the long run to make sure people with more money, higher credit scores, and higher reserves, are purchasing homes.
Here are some websites with more information about these changes:
HUD Press Release
BTW - I made an earlier post/vent about the no flip rule for FHA loans. Well, this has been lifted for a year - fabulous! Here is the article: HUD No Flip Lift Article
Thursday, February 25, 2010
Upcoming Changes to FHA Loans
Saturday, June 27, 2009
VHDA Home Buyer Tax Credit Plus - New Zero Downpayment Program
There are many wonderful people in Northern VA that do not make enough to gather substantial savings for home ownership - teachers, policemen, firemen are some of the folks that come to mind. Let's face it, homes are very expensive in this area - the difference between housing expense and salary is smaller here than in most of the country.
VHDA creates programs with these folks in mind - zero downpayment programs! The Home Buyer Tax Credit Plus has just been announced by VHDA. Combine this program with seller-paid closing costs and you are talking about buying a house for almost nothing upfront. Get your real estate agent and loan officer to help you figure out how to negotiate this.
This program is not directly tied to the tax credit, but it anticipates that the buyer will receive the tax credit within the coming year. Obtain a primary FHA loan of 96.5% and a second loan from VHDA of up to 5%. The best part is that the second loan doesn't require principal or interest payments for the first 12 months. The second loan is unsecured - VHDA is taking a risk for you! If you don't pay off the second loan within the first 12 months, it will be amortized starting in the 13th month at the same interest rate as the first loan and over 29 years. You must close on the house before Nov. 30, 2009 and meet the VHDA income and loan amount maximums.
The 5% can be higher than the maximum tax credit of $8,000 so the buyer must make a calculated decision about this. Also, keep in mind that the buyer may not receive the full $8,000. It is the buyer's responsibility to determine what kind of tax credit he/she will receive.
The interest rate may be slightly higher for VHDA - so this is ideal for people who can afford the monthly payment but cannot afford the upfront costs of buying a home.
Contact me with your questions about anything I have discussed here - this is just an overview and does not cover every circumstance.
More information about the VHDA program at: VHDA Tax Credit Plus Flyer
Monday, November 3, 2008
Hope for Homeowners Program
This program offers struggling homeowners an opportunity to refinance their upside-down mortgages to a principal amount closer to current market value. It was signed into law and is effective as of Oct. 1, 2008. It seems like it could get sticky since the lender has the power to decide if they want to participate.
At any rate, I have heard very little media buzz about this program. If you have had any experience with this program, please share in the comments section.
Below are two links on the HUD website describing the program.
Fact Sheet
FAQ
