The high amount of foreclosures and defaults by homeowners has had a widespread affect. FHA, which insures high leverage loans, is no exception. In fact, because of the allowances they give borrowers they were found to be in a very vulnerable position. Because of that they have taken great losses recently. To offset that increased risk future buyers will now be paying the price. FHA has announced a number of changes that they believe will reduce that risk and help recover some of those losses.
The changes announced are
- Up Front MI going from 1.75% to 2.25%
- Higher required down payments for lower credit scores
- Lowering the allowable concessions that sellers can give to borrowers
The result will certainly be less people able to qualify for these loans. However, it’s important to remember that this was their desired outcome. The goal was to eliminate some of the more risky borrowers that were on the fringe of qualification. It seems that they believe that by doing so, they will able to continue to help people buy homes without running the system into the ground.
The good news is that even with these changes, most people will still be able to use FHA to help them get into a home. It may take a bit more work, savings & preparation. The best advice – get into a conversation early with your Mortgage Planner. A good strategy can overcome many of these obstacles.
Jeremy Beck | Mortgage Plannner | Jeremy@GreenMeansGrow.com