To help shore up their reserves, FHA is increasing its upfront insurance premium fee to 2.25% (up from 1.75%).  It has also asked congress to increase the annual insurance fee it receives from borrowers.  These changes will take effect this spring.

To guard against defaults, the FHA will be raising the minimum down payment on borrowers with credit scores less than 580 to 10% of the purchase price (currently 3.5%).  This won’t effect the majority of FHA borrowers as fewer than 1% of those borrowers last year had a credit score under 580 (according to LPS Applied Analytics).

Also, the amount of seller paid closing costs will be reduced from 6% to 3% of the purchase price.

Both the 10% down payment and the seller paid closing cost cap will go into effect this summer.

While all of these new provisions will make it a tad more difficult for lenders to push some new borrowers through underwriting, the majority of buyers will be unaffected by everything except for the higher insurance premium.

As always, leave any questions or observations in the comments below.

The Geography of Jobs

The Geography of Jobs from TIP Strategies, Inc

Image from www.larealestateblog.net

President Obama signed the American Recovery and Reinvestment Act of 2009 into law last week.  Of note to potential home buyers and current home owners was Section 1006, which granted an “Extension of and Increase in First-Time Homebuyer Credit” as well as a Waiver of the requirement to Repay.  Here are the details:

• The previous tax credit was given to those that purchased their first home up until July 1st, 2009.  The new extension of the tax credit replaces that date with December 1st, 2009
• The previous tax credit was $7,500.00.  The new tax credit is $8,000.00
• The previous tax credit was essentially a $7,500 loan from the government to be repaid over time.  The new tax credit is does not require that you repay (with some exceptions…generally if you sell your home within a 3 year period from purchase).
• The effective date of this tax credit is December 31st, 2008.

To get more information on the original bill that the American Recovery and Reinvestment Act of 2009 revised, we’ve linked to a previous post of ours that explains the details of the old $7,500 tax credit

If you have any questions on the $8,000 tax credit and how it impacts you as a home buyer, don’t hesitate to ask.

Related Posts:

Your $7500 Tax Rebate | H.R. 3221, the “Housing and Economic Recovery Act of 2008″ | Why You Should Care Series – Post 2

Citigroup will hold off on foreclosures effective February 12th and will do so until either March 12th, 2009 or until the government finalizes all the details of its foreclosure relief package (whichever comes first).  JPMorgan will hold off on its foreclosures until March 6th (extending a program they had initiated last year).

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won’t be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

I understand the reasoning behind it is to ensure there is no behind-the-scenes talking between the lender and the appraiser to influence the appraiser’s final price valuation, but all this is going to end up doing is increase the length of time it takes to close on a home (as well as probably raise appraisal prices because of lack of competition).  I vote a big no for this one.

Additional Resources:
Federal Housing Finance Agency’s News Release
Federal Housing Finance Agency’s Home Valuation Code of Conduct

Check out our new Map Based Search of Homes for Sale in Minnesota

1. Those that were on the fence, really serious about buying, but waiting for the right time may be in the perfect position to get a house at a steep December discount with a great rate attached to it.

2. Those hoping to ride the housing prices out a little while longer before deciding to sell can refi to make it much more palatable during the next year or two.  Now, when refinancing, you always have to consider closing costs to make sure it makes sense, but something to definitely look into.

If you need any help in finding a good mortgage broker, I can always deliver a few suggestions that clients of mine have used in the past.

Those of you in Minnesota, stay warm and stay safe!