The Federal Housing Administration (FHA) will implement some new guidelines on April 5, 2010 that will tighten FHA financing and pinch buyer's purchasing power. They are increasing the Mortgage Insurance Premium (MIP) from 1.75% to 2.25%. This does not affect a buyers amount of cash they need to have for closing since that can be financed, but it will affect their pre-approval and it could increase their monthly payment by $50 to $100.
FHA is also decreasing the amount of seller concessions allowed to the borrower from 6% to 3%. This change will affect how much the buyer will need to raise for closing. However, this money can also be "gifted" by family or elsewhere. In addition, FHA will provide loans for buyers with credit scores 580 and below but will require a minimum down payment of 10%. Buyers with credit scores higher than 580 will require a minimum 3.5% down payment.
With these changes coming into play, it is just another good reason why buyers should act now and take advantage of this market.
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