Real Estate Market: FHA Changes You Should Know About

The Federal Housing Administration (FHA) has announced major changes to its home lending programs that may affect you as you shop for a home. These changes are effective for all loans received on or after April 5, 2010. The first change is an increase in the upfront Mortgage Insurance Premium (MIP) from the current 1.75 percent to 2.25 percent. That means on $100,000 loan, the MIP will increase from $1,750 to $2,250. The good news is that since the MIP can be financed in the mortgage, the increase will not affect your out-of-pocket cash. On a $100,000 loan financed at a 5 percent interest rate, your monthly mortgage payment would increase from $546.22 to $548.90, a difference of just $2.68 a month. The new FHA rules will also reduce allowable seller concession from 6 percent to 3 percent. Seller concessions may cover items such as closing costs, home repairs, etc. Usually, closing costs will fall within the 3 percent seller concession amount, but not always, so be sure to contact me as you explore your options. The last of the FHA changes to directly affect homebuyers concerns credit scores. If your credit score is below 580 at the time of qualifying, you are now required to put down at least 10 percent of your loan amount. If your credit score is 580 or higher, you will still be allowed to put down as little as 3.5 percent. Give us a call today or visit our website www.LeeAnnMiller.com to check out the current loan rates.

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