FHA is one of the largest sources of financing with its low down payment program and generous seller concessions. FHA is often the only way for many to afford to purchase a home. It is a well-known fact that many are able to afford monthly housing payments, but coming up with the down payment is extremely difficult for a large majority of those who wish to purchase a home. Bearing that in mind, FHA is taking new measures to help manage risk while maintaining support for the housing market and its recovery.
In a HUD Press Release on January 20, 2010 FHA Announces Policy Changes to Address Risk and Strengthen Finances, FHA’s Commissioner David Stevens announced policy changes. “Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Policy changes will be made to mortgage insurance premiums. The premiums will increase from 1.75% to 2.25% and this will go into effect in the spring. Also addressed are FICO scores and corresponding minimum down payment amounts. New borrowers will be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. Those borrowers with scores lower than 580 will be required to put at least 10% down, allowing FHA to better balance its risk. Additionally, seller concessions will be reduced from 6% to 3%. Down payment and seller concession changes are expected to go into effect in the early summer. Increased enforcement on FHA lenders is also slated in an effort to make information more user-friendly and hold lenders more accountable.
What do these changes mean to potential homebuyers in Tampa, Florida and the real estate market in general? These changes will have the result of increased fees and tighter qualification guidelines. That being said, buyers who have been on the fence waiting to see how low the real estate market will go should understand how these policy changes will affect them and take action to purchase their homes prior to these new policy changes taking effect.