Changes coming to FHA!

It is no secret that just a couple of years ago approximately 10% of home buyers utilized FHA financing. FHA financing was a great choice for those buyers who had less than perfect credit and who had little money to put down on a home as the down payment at that time was 3% and buyers were able to receive up to a 6% Seller Assist towards closing costs. This meant that if a buyer was purchasing a 200,000 home they needed a down payment of $6,000 and perhaps 1,000 extra in closing costs as the remaining closing costs were paid by the seller if they were agreeable.

FHA loans are issued by lenders but insured by the government. Today approximately 41% of home buyers are utilizing FHA due to the stringent conventional mortgage guidelines. Due to the number of defaults on loans in the past year FHA loans are changing. At this time you need 3.5% down however this will be changing. The new FHA guidelines will require 5-10% down when utilizing an FHA loan and they are taking away the ability to receive a 6% seller assist from the seller and minimizing that to 3%, the same as a conventional loan. Also the PMI is slated to go from 1.75% to 2.5%.

If you are a home buyer and utilizing FHA now is the time to purchase that home before these changes go into effect! Remember you must be under contract by April 30, 2010 and settle by June 30th, 2010 to also take advantage of the tax credit!