Sunday, February 7, 2010 - Article by: Kristen Harris - Home Savings of America -
FHA has announced few recent changes in the underwriting guidelines to qualify for a FHA loan and some changes with the FHA PMI (mortgage insurance).
This change will not have a major effect, as there are not many FHA loans being approved with scores below 580 at this time anyway. As long as your credit score is above 580you can still have the minimum FHA loan down payment of 3.5%. The best FHA loan interest rates and easiest/fastest loan process are for those FHA borrowers with credit scores of 620 or higher. If your credit score is below 620, give me a call as I will go over your credit with you and give you analysis as to how you can quickly raise your credit score.
This FHA mortgage insurance is paid to FHA to help insure FHA loans against default. This change affects all FHA borrowers who put down the minimum 3.5%. The FHA UFMI is rolled into the new loan balance so it is not paid out pocket (unless you elect to pay it out of pocket). So for example on a $300,000 loan, the old FHA up front mortgage insurance would have been $5,250, making your new loan balance at close $305,250. Starting April 2010, the FHA mortgage insurance on a $300,000 loan will be $6,750, making your loan balance at close $306,750. Talk to your CPA for more information on whether your entire up front mortgage insurance is tax deductible.
Often when you purchase a property, you can ask the seller to pay some or all of your closing costs. Starting April 2010 the maximum the seller will be able to credit you is 3%. The FHA is adding this rule to prevent sellers from inflating their prices so they can make large credits to buyers.
Some general highlights of FHA loans:
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