FHA Raises Loan Standards
Today the FHA is set to announce that it’s raising its standards for the loans it’s willing to guarantee. The new guidelines have a few big changes, but the one that will impact everyone, is the rise in initial insurance premium paid. In the new guidelines, the amount of MIP (Mortgage Insurance Premium) paid will rise from 1.75% to 2.25% of the value of the loan. Additional restrictions now include: the seller’s ability to help pay closing costs and minimum credit score for down payments. The new loan guidelines say the maximum amount of closing costs that can be paid by the seller is now 3% reduced from 6%. There will also be a credit score requirement in order to get the attractive 3.5% down payment. Borrowers will need a credit score of at least 580 if they want to put only 3.5% down. So what does this all ad up to?
If you’re thinking about buying in the next year it would be best to do it sooner rather than later. The tougher standards for FHA loans won’t impact most people’s ability to get an FHA loan, but it will cost you more to get one. It’s best to try and get any potential purchase done before these new regulations kick in rather than waiting till later. The other reason to buy now rather than later, is rising interest rates. Below, I’ve included a graph of interest rates in Massachusetts for the past month. In this graph, you’ll notice that mortgage rates are on the rise. As of today the average for a 30-year fixed is higher than it was a month ago and if you think back to November rates were right around 5% or for some, below 5% you can see we’ve had quite an increase.
Don’t get caught paying more later than you would if you bought today!
Tags: FHA, FHA Loans, Mortgages
Financials | Chris Dunn | 
January 20, 2010 12:20 pm
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