Effective April 1st 2013: FHA borrowers should make sure their lender has the purchase contract and pulls the case number prior to April 1st!
Once again FHA has made moves to bolster capital reserves. Without getting too mush in to the why, lets just say HUD felt that their reserves may dip too low, so they are jacking up the costs for FHA buyers. Here’s the details:
FHA Takes Steps to Bolster Capital Reserves
On Wednesday, the Federal Housing Administration announced a series of changes to strengthen the Mutual Mortgage Insurance Fund and improve risk management. Most of the changes were outlined last fall in the wake of the FHA Actuarial Report showing the MMI Fund with a negative economic value. Among the changes, FHA will:
This is the big change as it means most borrowers will never get out of paying the mortgage insurance which current drops off when the loan reaches a 78% LTV and they have been paying it for 5 years. Although statistically most borrowers are not in a mortgage more than 5- 7 years with rates at historic lows this time frame is expected to increase. On a 150k loan a borrower would pay $168 per month for mortgage insurance the entire life of the loan.
Additionally FHA will require lenders to manually underwrite loans for borrowers who have a decision credit score below 620 AND a total debt-to-income (DTI) ratio greater than 43 percent; effective for case numbers issued on or after April 1. Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded.
The Bottom Line: Realtors working with FHA borrowers and buyer obtaining FHA Financing should try to get an accepted offer over to their lender prior to April 1st, 2013 to avoid these increase. Better yet put 5% down and get a conventional loan to avoid the high mortgage insurance associated with FHA financing!
The real estate market is constantly changing, leading to many challenges for buyers and sellers alike. Never has there been a greater opportunity to leverage innovative lending solutions to better serve your clients. As you know we think outside of the box. Yes we do lots of loans that fit in the box, but getting the deals done that don’t fit in the box can make all the difference in this market. During this class we will cover some more unique loan programs and ways to structure transactions to help get offers accepted in an unconventional world. This class is approved for 1 hour of continuing education thank you Devon Title for sponsoring the continuing education portion of this event!
Here is a list of some of the things we will cover during the event: