FHA Announces Big Changes to Existing Programs

Today FHA announced that it would make sweeping changes to the current FHA mortgage program in an attempt to shore up it's beleaguered balance sheet.  As many existing FHA borrowers default on their home loans the move is necessary to ensure the program stays solvent.

The biggest impact will be the increase in the up front mortgage insurance required.  FHA will raise the up-front Mortgage Insurance Premium, paid by borrowers, from 1.75 percent to 2.25 percent as well as request legislative authority to increase the maximum annual MIP that the FHA can charge. This is the second time in two years that it has raised the premium.

In addition, in order for new borrowers to qualify for the 3.5 percent down payment program, they will now be required to have a minimum FICO score of 580.  Borrowers with a lower score will be required to put down at least 10 percent.

The FHA will also reduce allowable seller concessions, or how much the seller can help the buyer, from 6 percent to 3 percent. The change will give borrowers a greater financial stake in their home purchases.

Commissioner Stevens, with the FHA,  said he wanted borrowers to have more "skin in the game," and this is clearly a means to that end.

As of today, the date that these changes will take place has not been announced.  I would encourage my Realtor Partners to inform any prospects they may be working with to consider a move now if they have little cash for down payments and closing cost.

As a direct endorsed lender, I would be happy to assist any potential buyers with the best possible financing terms.

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts
Envoy Mortgage

Office:  (972) 661-5136   Fax:  (972) 314-9647

17311 Dallas Parkway Suite 173 Dallas, TX 75248

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