FHA announced today some policy changes to strengthen FHA's capital reserves. What that means to you and me is program changes!
First the upfront mortgage insurance premium is going to increase to 2.25% from 1.75%. This is the amount that is added to the mortgage at closing. FHA is also going to request legislative authority to increase the monthly mortgage insurance premium. If that authority is granted, FHA will shift some of the premium increase to the monthly payment instead of the upfront premium. For now, starting sometime this spring, the upfront will be 2.25%. The date has not been released yet, so far it is just this spring.
Starting this summer, the allowable seller paid closing costs will go from 6% to 3%. The exact date will be determined after a notice and comment period by the FHA. This will affect some borrowers, especially those with smaller loan amounts as 3% won't cover all the costs involved.
Another change for FHA is an increase in down payment for those with credit scores under 580. However that won't affect most borrowers as most lenders already require a minimum 620 or higher.
The upfront mortgage insurance premium will mean an increase of $750 on a $150,000 mortgage which is about $4.50 a month in a payment. For most people this will not affect how much they can qualify for, but you do want to be aware of it. FHA loans are still one of the most popular mortgages right now and these changes probably will not change that.
