Mortgage Video & Blogging Community

Here we go again…more FHA guideline changes coming to us this spring!

When subprime and alternative loan products disappeared, FHA was the savior in Los Angeles allowing home buyers to once again borrow with very little down payment, low credit scores and high loan limits.  But like many good things, they aren’t meant to last forever.  Securing an FHA mortgage in Los Angeles is about to get more expensive.

The Federal Housing Authority outlined policy changes Wednesday to its mortgage assistance program that is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.  For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10%
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

Khai McBride
800.399.6890 Phone | www.mcbridegroup.com
Follow us on Twitter: twitter.com/McBrideGroup
Join our Facebook Page: facebook.com/mcbridegroup