Orange County FHA Buyers to see changes in the coming year...

I have been telling FHA buyer's for months that there are going to be tougher changes brewing for FHA loans and the sooner they can find a home the better. 

Why?  Because the FHA is running out of reserves due to the surge in new FHA Loans.  FHA loans have gone from below 3% of the total market share to nearly 30% of all the home purchase loans being done today.

So here is what you need to know...

  1. Higher Minimum Down Payments (currently 3.5%) are being proposed to raise for buyers to 5% - 10% (this will make it more difficult for buyers).
  2. Increase Mortgage insurance Fees and Premiums:  Currently a buyer pays 1.75% of the loan amount (points) to the government when they purchase a home.  This fee will most like be raised to 2% of the loan amount.  Monthly Mortgage insurance will be also going up from the current .50% 0r .55% fee charged monthly for those who have loan balances above 80% Loan to Value (LTV)
  3. Cutting the allowed Seller Concessions paid by Sellers to offset a buyer's closing costs and loan fees.  They currently allow 6% and are proposing to cut them to 2%.  That's a big difference.
  4. Toughening Credit Standards:  FHA is by far the most lenient and flexible lender when it comes to credit scores.
  5. Tougher Restrictions on Condo Purchases:  FHA is revamping their restrictions and guidelines for condos that will have an impact on buyer's trying to purchase condos beginning in December 2009.

It is important to have a seasoned real estate professional helping you along with an experienced FHA loan officer to make sure you have the right guidance to find your dream home.

Your thoughts and feedback on this topic are greatly appreciated. Please feel free to post your comments.

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