January 20, 2010 - We told you about the new rule change that would allow buyers who want to purchase a previously foreclosed home from a flipper to get an FHA backed mortgage before the old 90 day wait period. Now we have news about more changes concerning qualifying rules for FHA loans.
It will soon become a bit harder and cost a bit more to get an FHA backed mortgage. According to a Tribune article, 30% of all new and refinanced mortgages are FHA backed and 50% of all first-time buyers use FHA loans.
David Stevens, FHA Commissioner, stated in the article that, “Homeownership is important to the sustainability of communities. But we’ve also learned that not everybody should own a home. Putting responsible guidelines in place is a way to insure sustainability for homeowners.”
The old low 3.5% down payment will only be available to homebuyers who have a credit score of at least 580. That’s up from the old minimum credit score of 500. If you have less than a 580 credit score you’ll have to put down 10%. A minimum credit score of 620 is required by most lenders.
Another change is that the old upfront mortgage insurance premium of 1.75% of the total loan amount will increase to 2.25%. Also, sellers will only be allowed to pay 3% of a buyer’s closing cost where previously 6% had been allowed.
These changes will go into effect in phases, starting this spring and continue through the summer. We’ll have to wait and see if any of these FHA mortgage changes affect first time buyers or make it easier to purchase Chicago foreclosures.
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