In 2007, FHA loans were only about 3% of the loans being written. With the changes in the economy and tighter lending practices, that number flew up to about 30% of the current loans for homebuyers.
Here are some of the changes buyers can expect to come up against when applying for FHA financing:
In order to qualify for the 3.5% down payment, borrowers will have to have a minimum credit score of 580.
Borrowers with a lower credit score will be required to put 10% down in order to purchase a home.
Up to now, seller’s have been able to pay up to 6% of the buyer’s costs to close a loan, and the FHA is saying that encouraged inflated appraisals. So now seller’s are only allowed to give a concession of 3% to buyers, meaning that buyers will have to come up with about another 3% of the price, in addition to their down payment money. On a $150,000 purchase, this means the buyer will have to come to the closing table with an additional $4,500.
Currently, buyers pay an upfront, one time fee for mortgage insurance of 1.75%. That number is being increased to 2.25%. As an example, for someone purchasing a home for $150,000, that would be an additional $750.
These changes are geared toward strengthening FHA’s and FHA officials are predicting that this should not affect too many homebuyers.
However, for those buyers that were planning on obtaining FHA financing in the near future, they may have to save up their pennies before being able to come up with the additional funds needed.