How the new FHA Policy Changes will affect Kansas City home buyers

How the new FHA Policy Changes will affect Kansas City home buyers

The FHA will be making the following changes starting in March of 2011 for Kansas City home buyers: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement.

Here is more detail and how they will affect Kansas City home buyers:

Announced FHA Policy Changes:

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
• The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. This will increase the money needed for Kansas City home buyers to purchase a home using using FHA financing.
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 new requirement will increase the money needed for a down payment for some Kansas City home buyers using FHA financing.
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. into effect in the early summer. With some Kansas City home buyers needing seller concessions to purchase their homes, there will be less funds available. This will have more of an affect on lower priced homes where 1% is a smaller amount.  
• In addition to the changes , FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
• The new changes, along with increased enforcement of compliance issues will make the FHA buying experience for Kansas City home buyers a little more costly, a little more tougher to obtain a loan and a little bit longer to process the mortgage loan.

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Blog post written by the Dowell Taggart Team of RE/MAX Best Associates

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