The Federal Housing Administration (FHA) has announced a set of policy changes to strengthen its capital reserves and manage its risk.
The FHA’s proposals includes:
- increase the mortgage insurance premium (MIP)
- update the combination of FICO scores and down payments for new borrowers
- reduce seller concessions to three percent, from six percent
- implement a series of significant measures aimed at increasing lender enforcement
See the entire announcement here: FHA Announces Policy Changes to Address Risk and Strengthen Finances
Of note, 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%.
skeptical
Great news for solvent buyers with good credit.
I never thought I’d see the Feds make a move towards more fiscal responsibility…. Too early to be so naive as to hope that it might be the beginning of a trend….
Sellers trying to wait this out might want to push the button now to try to scoop up some unqualified buyer with an FHA loan and the tax credit…
Selling soon
Can someone please explain what “reduce seller concessions to three percent, from six percent” means for a seller.
Sully
Heck, I’m still trying to figure out how giving a loan to someone with less then 580 FICO is going to strengthen its capital reserves even with 10% down. 🙂
RRB Fan
Selling soon: as I understand it the seller concessions were often negotiated in exchange for a higher selling price since those concessions could be used to cover transaction costs and reduce the $ out of pocket for the buyer. By imposing a 3% cap the FHA is attempting to counteract this. The net net to the seller should be no different other than the fact that marginal buyers may be disqualified.
billddrummer
To RRB Fan and Selling soon:
Unless you plan on loaning your buyer the money yourself, why would you worry about marginal buyers being disqualified?
Oh, I forgot: Marginal borrowers started this mess.
My bad.
MikeZ
@Sully: “I’m still trying to figure out how giving a loan to someone with less then 580 FICO is going to strengthen its capital reserves even with 10% down”
This change addresses risk.
I’m happy with this change. It’s about time we demanded more than 3%.
If a low-end borrower has the ability to pay *and* puts 10% down, I can live with a rotten FICO.
billddrummer
To MikeZ,
Point taken.