FHA Borrowing Standards Getting Tougher

February 22nd, 2010

Important for all first time home buyers!

The Federal Housing Administration (FHA) is a division of the Housing and Urban Development (HUD). The main Focus of FHA is to guarantee loans made to first time home buyers or buyers that have never used an FHA loan before. The goal is to help these buyers get into a home by offering lower down payments and “backing” the loan so that lenders take less of a risk loaning to these borrowers.

Typically, the first-time home buyer has little money to put down on a home and may have a very limited credit history.  This can often add to the difficulty of obtaining a conventional loan for the purchase of real estate. FHA has always been a great program in assisting borrowers in the purchase of their first home.  However, the FHA is now tightening their lending guidelines.
Today FHA Commissioner David Stevens announced a set of policy changes to strengthen the FHA’s capital reserves, these changes include

1.  Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
o The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.

2. Update the combination of FICO scores and down payments for new borrowers.
o New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

3. Reduce allowable seller concessions from 6% to 3%
o The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

4. Increase enforcement on FHA lenders
o Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.

For the full article please click on
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016   

Please contact one of our professional real estate agents today with any questions about these changes.

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Free Money to Buy a Home!

January 11th, 2010

With all the big news about the new and improved tax credit for buying a home, it seems like there are still so many people who don’t know or understand how it works and if they qualify

 

So here is the scoop…

As part of the stimulus package to boost the economy the government has passed a tax credit for buying a home. Now the words “tax credit” sound a bit confusing, you may think well only people who make a lot of money or pay a lot of taxes can get this credit. The fact of the matter is that they should have called it “Free Money to Buy a Home“. That is exactly what it is, you get free money for buying a home, now you may think that is crazy, why would you get money for buying a home? Well its simple, if you buy a home there is a chain of events that is set off that produce economic activity. The bank issuing the loan makes money, the title company makes money, a surveyor makes money, a home inspector makes money, a real estate firm makes money and the seller of the home from makes money and in turn they buy a new home. Buying and Selling homes creates an enormous amount of economic activity, so much so that the government is willing to give you up $8,000 to help the process. It’s AWESOME!

The real cool thing is that you can have that money in hand in 45 day!

SO…..

Who Qualifies for the new Credit?
* First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.

* Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?
Each home buyer’s tax credit is determined by tow additional factors:
1.The price of the home.
2.The buyer’s income.

You can visit the following link for additional information

http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit
Please contact a Prudential Ada Profesional Realtor today for more information!

Greg Glenn

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