New FHA Buyer Guidelines >> Mom always told you "Credit Matters"
Idaho First Time Home Buyers and first time home buyers across the country have had it pretty smooth for years when it comes to securing an FHA insured loan. The lower down payments of 3.5% and low mortgage insurance made the loans very attractive. What is mortgage insurance? Mortgage Insurance is a premium buyers pay on their loans which insures the lender against any loss in the event of a foreclosure. With the amount of homes FHA and other private lenders have ended up with the last few years FHA said new changes were required to streamline it's operation and remain solvent while at the same time rewarding buyers that have their financial home in order. Here are the changes FHA has announced:
Up front mortgage insurance goes to 2.25% from the current rate of 1.75%
Minimum down payment increases to 10% for credit scores of 580 and below
For credit scores of 580 and above the down payment remains at 3.5%
Reduces seller allowed contributions from 6% to 3%
The two biggest hits here are increased down payments for credit scores of 580 and below and the reduced seller contribution. Sellers in the past have been allowed to pay 6% of the loan amount to assist buyers in paying closing costs. This new rule will require Idaho First Time Home buyers to pay for more of the up front closings costs to secure an FHA loan. The up front mortgage insurance will go into effect on April 5, 2010. FHA will also seek legislation to raise the annual mortgage insurance premium to a level above the current cap of .55%. This is the amount that is added to loans over the life of the loan.
Bottom line is FHA is rewarding buyers which have taken care of their credit and penalizing those that have not. I have been telling Idaho First Time Home Buyers for years of the importance of taking care of their credit. This is so important and cannot be overstated. If your credit is not good please take measures to work on it and get it improved. You will be rewarded in many ways.
Questions? Call me directly at 208-880-2333