Potential FHA Changes

A report from a December 2nd Congressional hearing detailed testimony from HUD Secretary Donovan and FHA Commissioner that they expect FHA to announce changes that although are designed to ensure FHA's long-term financial stability, will make it tougher and more expensive for borrowers to obtain FHA loans and will logically and economically reduce the number of eligible borrowers.

Here are some of the highlights:

• Increase the current down payment from 3.5% to 5%
• Raise the upfront premium from 1.75% to as much as 3%
• Eliminate the ability to roll in to loan that up front premium
• Increase monthly MIP from .55%
• Reduce seller concessions from 6% to 3%
• Raise minimum FICO score(credit score)
• Possible LTV(loan to value) maximums by FICO score
• Increase accountability of FHA lenders for fraud

These changes are expected to be implemented within a couple of months, and will no doubt motivate scores of serious buyers considering their purchase, as well as would be buyers, to expedite their decision and not only take advantage of the $8000 Federal Housing Tax Credit that will also expire early this year, but to qualify for financing before the new FHA rules go in to effect. The new guidelines, once in effect, will for the most part negate the incentive that the $8000 tax credit was designed to create.

If you are considering the purchase of a home in Riverside, Corona, Norco, or other communities withing the greater Riverside area, please contact The Baird Team for guidance and the proper help in finding your new home and obtaining financing before these adverse changes take effect.