FHA Guideline Changes for 2010

FHA Guideline Changes for 2010

There are many new guideline changes for FHA in 2010. Some are positive and some are not so positive. However, many of these will benefit real estate professionals and home buyers. Here are some highlights of some of those changes:

• Increase Up-front Premiums for FHA Mortgage Insurance
  Effective on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent. This will increase premiums for purchase and refinance transaction.
• New Down-payment/Credit Score Requirement
  Effective on or after April 5, 2010, loans with FICO scores of 579 or lower will require a down-payment of 10% and loans with FICO scores of 580 or above will require the current 3.5% down-payment.
• Decrease in the Maximum Seller Contribution
  Effective on or after April 5, 2010, maximum that is currently at 6% will  become 3%.
• New Approval Process for Condominium Projects
  Spot approval process being replaced by new streamlined process, which may affect buyers, sellers/developers and homeowner associations.

So what are the benefits to real estate professionals from these changes?

1. More buyers will enter the market because they can afford the lower down payment.
2. No single investor can purchase more than 10% of the units, so the idea of a controlled association by one or two investors is no longer a threat.
3. More inventory will offer wider choices tending to keep prices in check, as "FHA approved’ condominiums come on line.
4. The lender who provides the mortgage will have to approve not only the condo documents, but the condo association’s budget, reserve account and its fidelity insurance policy.
5. New construction developers have the guidelines needed to create urgency in their pricing strategies, which is key to building and maintaining momentum.
6. Commercial lenders will have a more comfortable level with developers. While the 50% presale requirement may look obtrusive, it is actually a benefit to the developer, because it will create urgency for buyers to purchase.
7. Established associations that have dragged their feet to get their finances in order, now have a valid value-based reason to become "FHA Approved. "
8. Real estate agents will show FHA approved condominiums with confidence in the association’s finances, not just because the down payment is low.
9. Forward thinking lenders will hustle to become a "an approved lender’ in resale and new communities alike.
10. Knowing the property already has approved lenders will make competition for listings tighter and will attract more buyers and more prospects to the listing.

Brokers taking listings in condo communities without FHA financing will be competing with ones that do, making it important for associations to seriously consider becoming FHA approved.

First time home buyers are generally thought of as the primary market for FHA financing. There is something to that, but in today’s world, many who bought their first homes years ago and lost them during this recession will appreciate the FHA financing availability even more than those coming out of rentals.

Comments

[mortgage]

The official term here is "investor overlay". It's when that banks use Federal Housing Authority guidelines as a starting point for their own set of underwriting rules which are often more strict.