For some people it may get a little harder to get an FHA mortgage in the near future. Looking to shore up its weakened finances, the Federal Housing Administration has announced stricter standards. The FHA, who insured nearly a third of new mortgages in 2009, is going to increase the premium it charges for its mortgage insurance and increase the required minimum down payment for those borrowers with lower credit scores. The agency will also reduce the amount of money a seller can provide a buyer towards closing costs from 6% to 3%, as well as tighten its enforcement of lenders.
Is this bad news? Well no, not for most people. FHA will still be available and the best choice for those with low down payments or troubled credit. The increase in the mortgage insurance premium is financed over the life of the loan and will have a very minor impact on monthly payments (for most people it will amount to the price of lunch on Wednesday). The 6% to 3% cut on seller contributions is no big deal either. At least not int he Sacramento – Roseville markets. In my business I see purchase contracts every day and I can’t remember the last time I saw one with the seller giving more than 3% back to the buyer for closing costs (if your closing costs are more than 3% YOU’RE WORKING WITH THE WRONG LENDER!!!!!).