The Federal Housing Administration has unveiled a new set of policy changes designed to strengthen their insurance program, which guarantees FHA lenders against losses from defaults.

Among the new changes:

• Effective in Spring, FHA will increase the mortgage insurance premium by 50 bps from 1.75% to 2.25%.

• New down payment system – borrowers only qualify for 3.5% minimum down payment with a FICO score of at least 580. Credit scores less than 580 will require at least a 10% down payment.

• Seller concessions will drop from 6% to 3%. This change reflects the condition of the marketplace, and helps reduce the risk of price inflation.

In summary, FHA seeks to:

• increase its enforcement of standards on FHA lenders by holding them more accountable and informed of where expectations should be.

• pursue additional amendments to the National Housing Act that would apply provisions to all direct-endorsement lenders requiring them to assume liability for all loans they underwrite.

• pursue legislative authority to establish separate areas for lender review and termination under the credit watch initiative. This initiative would allow the FHA to withdraw originating and underwriting approval from a lender nationwide based on performances of regional branches.

The changes come as a result of reaching the priorities of the FHA:

• To get the capital reserve headed back to the minimum requirement (to 2% rather than .58%)
• To keep from disrupting the housing finance industry
• To support under-served communities with first time homebuyers.

Along with these changes, the FHA has waived the regulation that prohibits the use of FHA financing to purchase properties being resold within 90 days of acquisition. The waiver of the regulation takes effect for all sales contracts carried out on or after February 1, 2010. They encourage investors to renovate foreclosed and abandoned homes in order to increase the availability of affordable homes for homebuyers. They seek to stabilize real estate prices, neighborhoods and communities with high foreclosure activity. The waiver applies to all properties being resold within the 90-day period and is not limited to foreclosures.

Waiver limitations:

• All transactions must be arms-length
• Additional documentation required if sale price is 20% over seller’s acquisition costs
• Is limited to forward mortgages and does not apply to HECM (Home Equity Conversion Mortgage) programs

FHA Guidelines and 90-day Waiver Program Changes is a post from: mesa-az-mortgage.com

If one thing is for sure, its change.  Things are always changing in the mortgage world so it is a good thing to have a knowledgeable Mesa mortgage loan officer on your side-to know the details, ins and outs and best recommended programs to meet your needs. 

The FHA Anti-Flip rule has changed.  But first, let me back up and explain the Anti-Flip rule. This rule has been in effect for much of the last 10 years and was put in place to prevent predatory lending.  FHA would not provide mortgage insurance on a house if the owner had it for less than 90 days.  Flipping occurs when homes are purchased and then sold within 90 days at an artifically inflated price to obtain a considerable profit.  

Previously, FHA has not allowed any property to be sold for even a dollar more than the original price plus the cost of improvments which deterred many investors from the market (AZEmployeesAndTeachersHomeLoanPrograms.com).  BUT the change means the rule is being suspended for at least one year.  The lifting of the rule will make more homes available to first time homebuyers wanting FHA Loans and/or assistance, it is meant to help low down payment buyers, investors who fix up foreclosures, and local communities burdened with too many foreclosures (LAtimes.com).  So, they are once again providing mortgage insurance on homes in which the owner closed less than 90 days prior to the new sale.  

There are minimal restrictions still in place regarding the flip rule of which are:

1. must be an arms-length transaction 

2. if the price is more than 20 percent above acquisition price, lender conditions may apply

A group that may be interested in the change to this rule are investors.  The goal of this change is to allow investors to purchase properties, fix them up and resell them.  By doing this, it may help speed up sales.   Now more homes will be available and first time home buyers will be able to qualify for FHA loans on these types of homes.  This is a huge change for many, especially those looking to fix up and resell.

Photo: © Lisa Heuer Photography

Changes to the 90 day Anti-Flip Rule is a post from: mesa-az-mortgage.com

When shopping for a house in Mesa, many people I speak with ask me questions about the various types of mortgage products that are available.

And when it comes to people who are buying a home for the first time, many times I explain that there are really 3 reasons that the FHA loan program is the most popular one for first time home buyers in Mesa.

FHA loans have more flexible underwriting guidelines. As the credit crunch is happening, FHA loans remain more flexible than other types of loans when it comes to what an underwriter will or won’t approve. Sure, it is tougher to get a loan approved now than it was a few years ago — but FHA loans still have more flexibility than other loan programs.

FHA loans require less money as a down payment. FHA requires that you have 3.5% down payment while conventional loan programs require at least a 5% down payment. When moving into your first home, it is important that you have enough money to cover your moving expenses and new purchases, so having a low down payment is an important thing to consider.

Are there more reasons that FHA loans are popular? Sure. But these are the most common reasons I hear from clients about why they like the FHA loan program.

FHA loans offer low fixed rate mortgage options. When shopping for a mortgage program, most people I work with opt for a 30 year fixed rate mortgage so they can budget for their payment each month and don’t have to worry about their payment skyrocketing later down the road. FHA loans offer low fixed rates that last for the life of the mortgage.

3 Reasons FHA Loans Are Popular is a post from: mesa-az-mortgage.com