How much harder will it become to get a mortgage loan?!?!

Have you spoken with a lender recently?  Seems that FHA loans, the mortgage money of choice for many homebuyers, may become more difficult to get. A short piece on Marketplace Money from American Public Media goes into this topic.  It seems that the FHA may soon have stricter guidelines:

  1. raising the minimum down payment from 3.5% to 5%
  2. raising the minimum FICO credit score to 620
  3. raising both the upfront and ongoing mortgage insurance premiums
  4. reduce maximum Seller contribution allowable from 6% to 3%

All this and more in the name of shoring up FHA reserves, which are astonishingly low.  What used to be the lending program of last resort is taking a bath on continuing mortgage defaults.  The concept behind FHA is to provide financing for moderate income borrowers chasing the American Dream of of home ownership, and it’s done a good job of helping those folks achieve their goals.

But there are still a lot of good people out there with decent jobs that could afford the monthly payment, if they could just get the key to the front door.  That’s where most of my FHA buyers have really seen the benefit of using a FHA loan.  20% down AND closing costs (2-3% of sales price) make for a pretty large cash payment right out the box.   Keeping the required FHA downpayment at 3.5% would be awesome; raising it to 5% would mean that some of the buyers I’ve worked with this past year wouldn’t have been able to afford buying that home.  They can afford the monthly payment – just didn’t have enough money saved up.

So, if you’re among the group of home buyers that are looking to take advantage of all the incentives out there to help you buy — including but not limited to only needing 3.5% down to buy — now is most definitely the time to take action.

As always, call me and let’s talk.  I can help you make sense of all of this, and negotiate the best deal in town on your new home purchase.