Tag Archives: fico

New Guidelines for FHA Loans

The FHA (Federal Housing Association), who currently does about 30% of the current loans in today’s market, is changing a few of their rules and fees.  Three years ago, FHA loans made  up about 2% of the loan market.  One of the reasons that the FHA makes most of the loans now is that they only require the buyer to put 3.5% down to purchase a home.  With only 3.5% down, the FHA can also ask the seller to pay up to 3% in closing costs.  The catch to these loans is that they are not cheap and they require the buyer to carry PMI (property mortgage insurance) to protect the risk of such a low down payment.

The changes are as follows:

  • Increase FHA insurance premiums
  • Increase upfront cash by the borrower
  • Focus on enforcement and lender accoutability
  • Reduce the maximum seller concessions from 6% to 3%
  • Raise the minimum FICO score to qualify

I think these could be good changes — the FHA is trying to make sure that the buyer is more strongly qualified so that we don’t end up with people buying homes that they can’t afford.  If a buyer only puts 3% down and gets 6% back in closing costs, they are basically coming up with no cash.  Buying a home takes more than just a down payment; you also need to maintain the home which, overall, is more expensive monthly than renting.

We need to take accoutablility for our expdentures…

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