| Buyers will be pinched by the new FHA rules - Mar 11, 2010 |
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FHA’s tightened lending requirements, announced late January, are designed to shore up the FHA’s capital reserves and help the agency do a better job of managing risk.
FHA is raising its up front mortgage insurance premium to 2.25 percent from 1.75 percent, boosting the minimum down payment to 10 percent for borrowers with a credit score of 580 and below (it stays at 3.5 percent for everyone else), and reducing permissible sellers concessions from 6 percent to 3 percent.
Reducing seller’s concessions will hurt because these funds typically help buyers take care of closing costs like title insurance and mortgage origination fee. As a result, buyers might have to come up to another 1 percent of the mortgage amount.
The FHA is also seeking to legislation to raise the annual mortgage insurance premium to a level above the current cap of .55 percent.
Information obtain from the REALTOR Magazine - March Edition
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