Financing a FHA loan is going to get tougher.
Up coming GUIDELINE changes to the FHA loan program:
- Allowable seller concessions are going down from 6% to 3%
- For people who have a credit score below 580, the down payment requirements are going up from 3.5% to 10%
- The UFMIP requirements are going up from 1.75% to 2.25%
Seller Concessions Reduced From 6% to 3%
In my opinion, this change possibly has the biggest impact. Many times when negotiating the price of a home, seller concessions can help the buyer actually be able to afford getting into the house. While it won’t be a deal killer every time, this will make it more expensive for buyers in many cases — and I expect that it will result in higher out-of-pocket costs to buy a home.
Low Credit Score = Higher Down Payment
For people who have a credit score that is lower than 580, the new down payment requirement will be 10% rather than the current 3.5%. While this may seem steep if you have a low credit score, the reality is that very few (if any) lenders are still doing FHA loans for people who have lower than a 580 credit score. My guess is that after this goes into effect, virtually no lenders will provide FHA financing for people with a credit score below 620.\
UFMIP Requirements Going Up
When you get an FHA loan, you are required to pay UFMIP (Up Front Mortgage Insurance Premium) and from time to time, HUD adjusts the amount they require to be paid. Due to the fact that FHA cash poor at the moment, they are raising the amount required to be paid. There isn’t a technique around paying this UFMIP when you get an FHA loan – but the good news is that if you don’t have the cash to pay all of it up front when you get your loan, you can finance the entire amount into your loan. We consider this to be a wash and it will not affect your cash to close.
FHA loans in South Florida Market is ideal for homes, there are a very small amount of condos that approved FHA for FHA loan. Check if your condo is approved FHA here: Approved FHA Condos
Get more details about HUD’s press release detailing a few of the changes to the FHA program.
