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…