By now you’ve heard that FHA has made some changes to its program. FHA’s reserves are in danger at the moment, and the changes it has made will sustain the program for years to come.
I know that sometimes change doesn’t go over well. But in this instance, the changes are much better than expected and will keep FHA strong for the future of our business.
You can read about all of the modifications here, but let me highlight a few:
–NAR urged HUD to keep the down payment minimum to 3.5 percent. We’re thrilled they listened to us!
–Borrowers with FICO scores lower than 580 will now have to make a ten percent down payment. But most lenders are adhering to credit scores around 620 anyway.
–The upfront mortgage insurance premium will increase to 2.25 percent from 1.75 percent. In addition, FHA will still permit financing of these premiums. This is another Realtor® victory!
–Borrowers will only be able to accept seller concessions up to three percent, instead of the previous six percent.
As far as seller concessions go, my experience is that the average concession is rarely higher than 4.5 to 5 percent without decreasing the required 3.5% downpayment for the borrower based upon normal closing costs. But this change will be open for public comment, and NAR will be urging for an increase.
Yes, these changes will prevent some would-be buyers from owning a home right now. But they will keep borrowers safer in the long-run by weeding out those who may not be ready to purchase a home yet. In addition, FHA was facing strong pressure from the Administration and Congress to make even stricter modifications. NAR policy leaders met with FHA in December and helped influence less dramatic changes.
FHA has been a mortgage savior for the housing market in recent years. Homebuyers have been seeking help from the program in record numbers. I hope you’ll read about the changes and educate your clients on them.
I also hope you’ll let your clients know they have exactly 83 days from today to put a contract on a house and be eligible for the homebuyer tax credit.
By supporting programs like FHA and the homebuyer tax credit in the last year, Realtors® are jumpstarting the housing market and the nation’s economy in unprecedented ways.
Stay positive and keep up your stamina. I expect we will be sprinting to the finish come April. – Brooke Hunt, 2010 NAR Vice President and Liaison to Committees