FHA Changes coming...
FHA Changes coming...
The Federal Housing Administration is implementing a set of rule changes that will make it harder to refinance your current mortgage or to buy a new home. The FHA provides mortgage insurance on loans made by approved lenders. By lessening risk it fulfills its Depression era mandate to increase home ownership.
When it comes to refinancing many distressed borrowers have taken advantage of FHA Streamline Refinancing. It allows a borrower to refinance a mortgage without an appraisal, credit underwriting, a credit check, income verification, specific debt ratios, or even a face to face meeting
To qualify
•You must have a current FHA home loan at least six months old, with no late payments of late notices in the previous year.
•You need to verify employment although proof of income is not required.
•Your refinancing should be intended to lower your mortgage payments.
As of January 1st, 2010 Streamline will require income verification, a full appraisal, and income verification.
This past week, the FHA announced that it intends to seek Congressional approval for a set of changes in its requirements for new mortgages:
•Currently the FHA requires a 3.5% minimum down payment. The agency is seeking to raise it to at least 5%.
•The FHA charges an insurance premium of 1.75% in advance. The FHA is seeking to raise it closer to the statutory maximum of 2.25%. The agency also charges an annual premium of either .5 or .55% depending on the amount of the deposit. It would also like to raise this.
•Today the FHA requires a minimum FICO score of 500. It is looking to raise the credit score floor. Most lenders won’t consider offering a home loan to a borrower whose credit score is below 620.
•The FHA intends to limit the concessions that sellers give buyers to 3% of the purchase price, not the 6% currently allowed.
In a year of falling home values, and tighter credit, the FHA has become the home loan lender of last resort, insuring nearly a third of all homes sold in the US in 2009. 75% of these buyers were first timers. It has also handled 20% of the nation’s refinancing this year. At the height of the housing bubble in 2006, the FHA’s mortgage share was just 3%.
As FHA’s market share has increased, so has its delinquencies. The new, tighter loan requirements are due to the fact that the FHA cash reserves have fallen below the 2% minimum mandated by Congress. The moves are designed to avoid yet another financial institution bailout.
According to Vicki Cox Golder, president of the National Association of Realtors, more than 50 percent of black borrowers and almost 50 percent of Hispanic buyers rely on FHA guaranteed mortgages. Golder urges the agency to tread lightly with any changes to its policy.
When it comes to refinancing many distressed borrowers have taken advantage of FHA Streamline Refinancing. It allows a borrower to refinance a mortgage without an appraisal, credit underwriting, a credit check, income verification, specific debt ratios, or even a face to face meeting
To qualify
•You must have a current FHA home loan at least six months old, with no late payments of late notices in the previous year.
•You need to verify employment although proof of income is not required.
•Your refinancing should be intended to lower your mortgage payments.
As of January 1st, 2010 Streamline will require income verification, a full appraisal, and income verification.
This past week, the FHA announced that it intends to seek Congressional approval for a set of changes in its requirements for new mortgages:
•Currently the FHA requires a 3.5% minimum down payment. The agency is seeking to raise it to at least 5%.
•The FHA charges an insurance premium of 1.75% in advance. The FHA is seeking to raise it closer to the statutory maximum of 2.25%. The agency also charges an annual premium of either .5 or .55% depending on the amount of the deposit. It would also like to raise this.
•Today the FHA requires a minimum FICO score of 500. It is looking to raise the credit score floor. Most lenders won’t consider offering a home loan to a borrower whose credit score is below 620.
•The FHA intends to limit the concessions that sellers give buyers to 3% of the purchase price, not the 6% currently allowed.
In a year of falling home values, and tighter credit, the FHA has become the home loan lender of last resort, insuring nearly a third of all homes sold in the US in 2009. 75% of these buyers were first timers. It has also handled 20% of the nation’s refinancing this year. At the height of the housing bubble in 2006, the FHA’s mortgage share was just 3%.
As FHA’s market share has increased, so has its delinquencies. The new, tighter loan requirements are due to the fact that the FHA cash reserves have fallen below the 2% minimum mandated by Congress. The moves are designed to avoid yet another financial institution bailout.
According to Vicki Cox Golder, president of the National Association of Realtors, more than 50 percent of black borrowers and almost 50 percent of Hispanic buyers rely on FHA guaranteed mortgages. Golder urges the agency to tread lightly with any changes to its policy.
