Atlanta Home Buyers – FHA Update

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Atlanta Home Buyers – FHA Update

Atlanta home buyers have plenty of reasons to buy a great house today. There’s certainly plenty to choose from, prices (for the most part) are great and interest rates remain low (although trending upward).

Oh, and we can’t forget about the ability to qualify for $8,000 for first-time homebuyers or $6,500 for repeat homebuyers.

One more wrinkle has thrown in recently. Last week, the Federal Housing Administration (FHA) announced that they would be taking steps to reduce their risk in lending to home buyers.

Announced FHA Policy Changes:

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending. As private mortgage insurance (PMI) on conventional loans have increased, more buyers have used FHA loans as they were more affordable. The MIP will now be raised to 2.25% and the will request legislative authority to increase the maximum annual MIP that the FHA can charge.

2. Update the combination of FICO scores and down payments for new borrowers. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.

3. Reduce allowable seller concessions from 6% to 3%. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

4. Increase enforcement on FHA lenders.  FHA has always been a good financing option if you less downpayment in hand and if your credit score was a bit lower than what some banks liked. Over the last few years, FHA has written almost 30% of the loans (up from 3% back in 2006) and has suffered from rising delinquencies.

The agency will now use these new measures to build its reserves and keep FHA-insured financing alive and well for homeowners. HUD Secretary wants borrowers to “have more skin in the game” as a way to reduce future defaults.

These measures are expected to take effect later this Spring and Summer. So in addition to the $8,000 tax credit, great prices, a good supply of homes to choose from and low interest rates, you can now add stricter and more expensive FHA financing looming as reasons to not delay your Atlanta home search.

If you would like some professional guidance for you Atlanta home search, don’t hesitate to contact us.