FHA Loans Getting More Expensive

Posted by Phil Boren on Thursday, January 21st, 2010 at 1:34pm.

The Federal Housing Authority, or FHA, is changing the rules on FHA loans, and these rule changes will make the loans more expensive. Traditionally, borrowers with less-than-stellar credit and/or less than 10% down would turn to an FHA loan. A lender could approve the loan under FHA guidelines, with as little as 3% down. While the amount down was recently raised to 3.5%, these new changes are far more significant. The FHA basically charges for this insurance in 2 ways - an up-front fee (MIP) and an annual fee, both of which the borrower pays.

Starting in the Spring or early Summer (no exact date was given), the new FHA guidelines will include the following provisions:

If the buyer's FICO score is below 580, the minimum down payment requirement will be raised from 3.5% to 10%
The up-front fee (or MIP), will be increased from 1.75% to 2.25% of the loan amount
FHA has also asked Congress to approve an increase in the annual fee, currently at 0.55%
Seller concession amount will be reduced from 6% of the purchase price, to 3%

You can read more details here, but these changes are significant and will, at best, make FHA loans more expensive. At worst, these changes may further shrink the home-buyer pool later this year, at least in the lower price ranges. This could affect home buyers and sellers. You should check with one of our preferred lenders for specifics on your loan situation, but this might be yet another reason to buy sooner than later.

As always, if you have any question about Boulder real estate, please feel free to contact us.

Phil Boren
Direct: 303-441-5647
Email: pboren@remax.net
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