This week, HUD began outlining some of the potential changes that could be heading our way. FHA loans have increased dramatically over the last year as loan programs have reorganized. Historically, FHA has accounted for only 3-5% of all home loans in our country but currently they account for almost 30% of purchases and 20% of all refinances.
Due to this huge swing in market share, HUD is discussing ways to protect FHA from future potential losses from delinquent mortgages.
Here are some of the changes that are being looked at:
- Reduce the maximum permissible seller contributions towards closing costs and pre-paids from 6% to 3%.
- Raise the minimum FICO score required to obtain an FHA loan; currently this sits at 620. There has been no specific FICO score mentioned at this point, just be aware that it could be raised soon.
- Raise the down payment. Currently the minimum down payment still sits at 3.5% and there has been no mention of a specific down payment in the proposal but it is something FHA is considering.
- Raise MIP – The up-front mortgage insurance premium is currently at 1.75% of the loan amount (in most cases) and they are considering an increase to up to 3.0%. The annual premium (monthly mortgage insurance) is also under fire and may be increased as well.
I encourage you to visit HUD’s website at http://portal.hud.gov for the most up to date information of changes as they occur.
