Changes Coming in FHA Requirements

January 21st, 2010 categories: Mortgages

There are some changes coming in the FHA requirements that are worth noting.  The Federal Housing Administration has been under pressure recently due to higher defaults and falling reserves.  To be clear, you should know that the FHA doesn’t actually lend money to home buyers, but insures lenders against default of loans that meet FHA requirements.

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.

Spoken by Don Edam | Discussion: 1 Comment »

Your $8000 Tax Credit | What Home Buyers Need to Know about the American Recovery and Reinvestment Act of 2009

February 24th, 2009 categories: Finances, Home Buying

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

Spoken by Don Edam | Discussion: 4 Comments »