FHA is changing guidelines

Changes affect ability to borrow!

December 2011: The FHA has recently announced changes that are going to make it harder for marginal buyers to qualify for this type of loan.

- Mortgage insurance premiums are required when the buyer doesn't put a significant amount of money down when they purchase a home.  The up front mortgage insurance premium will be increased from 1.75% to 2.25%  - FHA will allow this amount to be financed along with the loan

- Tougher standards for credit scores will be requires.  If your credit score is above 580, the minimum down payment will stay at 3.5% of the purchase price.  For those with lower credit scores the minimum down payment is increasing to 10%.

- In this market buyers frequently ask the sellers to contribute money toward their closing costs and pre-paid mortgage expenses.  The limit of that contribution is being reduced from 6% to 3% of the purchase price.

- The annual FHA premium is currently capped at 0.55% - they're working to get legislative approval to increase that premium over time so the up front premium might be reduced.

Bottom line: Buyers without significant down payments and good credit scores are going to find it harder to qualify for an FHA loan