Effective April 5, 2010, it will cost you more to buy a home using FHA. With the market still trying to correct itself, FHA has insured more mortgage loans than ever before over the past 18 months. More loans mean more risk is being assumed. With more risk comes greater cost – passed on to the buyer.
However, prior to April 5, 2010, we can proceed under the current guidelines. If you plan to buy a home, you must get your ball rolling now.
Here are the changes and proposed changes:
- The Upfront MIP will increase from 1.75% to 2.25% of the loan amount.
- The seller can contribute a maximum of 3.00% towards buyer closing costs (versus the prior 6.00%) – proposed.
Take a look at how your effective costs could increase if you were buying a $200,000 home NOW versus buying on May 1, 2010:
| Buy NOW | Buy on May 1, 2010 | |
|---|---|---|
| Purchase Price | $200,000 | $200,000 |
| Down Payment | $7,000 | $7,000 |
| FHA Upfront MIP | $3,500 | $4,500 |
| Closing Costs Paid By Seller | ($12,000) | ($6,000) pending change |
| Closing Costs Paid By Buyer | None | $6,000 |
| Tax Credit (if applicable) | - $8,000 | None |
| TOTAL EFFECTIVE COSTS | $2,500 | $17,500 |
The difference in these numbers is more than enough to make mortgage payments for a full year for many home buyers. Contract dates and closing dates are very critical when trying to meet the required timelines.
The changes in the maximum seller contribution from 6.00% to 3.00% will most likely be determined in the late spring.
I am here to help you muddle through the maze. Call me today to get pre-qualified or to ask any questions. Waiting to buy will be costly.
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{ 6 comments… read them below or add one }
is down payment still the same for the fha?
@Secretary 9099 – The minimum down payment is still 3.5% as of now. There was rumor about it moving up across the board, but nothing so far. However, anyone with a score under 580 needs a 10% down payment. This is almost meaningless since it is near impossible to get a loan approved by a lender with a score of 580……
Can the seller credit be used for my down payment?
Do you know when the change will happen changing seller help from 6 to 3%? or if it is happening
@Vickie – No, the seller credit cannot be used for a down payment. You can, however, get a gift for the down payment. Let me know if you have detailed questions about using a gift as a down payment.
@Freda – The reduction in seller concessions from 6% to 3% is slated for this summer.