Changes Coming to GA FHA Loans

fha-changesOn January 2oth, FHA announced they will be making some changes in the upcoming months.  They are looking to strengthen FHA’s capital reserves, which have diminished over the past several years due to the high number of foreclosures.  They plan to make changes in 4 different areas:

  • Mortgage Insurance Premium (MIP) will be increased from 1.75% to 2.25%.  On a $100,000 loan this would mean a $500 increase in the upfront MIP premium.   This will supposedly take place in the spring.
  • They will require 10% down if a borrower has a 580 score or less.  We are not yet sure what kind of effect that this will have.  Most lenders already require a 620 credit score, so this may not affect anything or it may cause lenders to loosen up their requirements on scores.  Time will tell on this one.  It is anticipated this will take place in early summer.
  • Reduce seller concessions from 6% to 3%.  FHA feels that the current 6% level is creating incentives to inflate appraised value.  This is also supposed to take place in early summer.
  • FHA wants to increase enforcement on FHA lenders.  They plan to do this by publicly reporting lender performance, monitoring lender performance and compliance.  They are also trying to get legislative approval to increase enforcement on FHA lenders.  FHA wants to make lenders liable for loans they originate and underwrite.

One final thing FHA has been testing the water with is raising the 3.5% down-payment to 5%.  This will definitely eliminate a lot of potential buyers.  This is not official yet, but may be coming soon.

All of these changes will most likely make it more difficult for buyers to obtain a Georgia FHA loan in an already tight credit market.   If you are thinking about getting a home, now is the time to do so.  The credit markets continue to tighten and there does not appear to be relief in sight.

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