Recent announcements by FHA will have impacts on our spring time (and beyond) buyers. The rules mean more money down and higher payments, here's the scoop:
- Beginning April 1, 2010 the Upfront MIP is increasing from 1.75 to 2.25. (MIP is the Mortgage Insurance Premium that all buyers using an FHA loan get to pay, up front in order to obtain the loan.) to give you an idea of how much this increase is, let's talk numbers. On a $200,000 the Upfront MIP increases by $1,000. Typically the buyer finances this amount into the loan, making that $200,000 loan a $204,500. This increase raises the buyer's payment on a 5% loan by $5.35 a month for 30 years.
- The good news for investors (AKA flippers) FHA has implemented a waiver (beginning Jan. 15, 2010) that allows properties to be transferred without having to wait the required 90 days. This rule which personally I have never understood has only been waived for one year. Apparently FHA is realizing that it's not good to interfere with investors who are actually helping our economy?
- Buyers who's FICO credit scores are less than 580 (this is a relatively low score) will now be required to put 10% down when purchasing a home using FHA financing. This is a double whammy for those with low scores, typically they have a low score and no cash. This rule is reinforcing the importance of maintaining a good credit score.