Proposed changes to FHA Testifying before the Housing Financial Services Committee recently, Secretary of Housing and Urban Development (HUD) Shaun Donovan announced possible policy changes for Federal Housing Administration’s (FHA) borrowers. Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default. Proposed changes include: • Raising the minimum credit scores requirements: Currently borrowers with FICO scores as low as 500 may qualify for an FHA-insured loan. The new minimum credit score has yet to be determined. • Increasing down payment requirements: FHA borrowers currently can put down as little as 3.5 percent. A proposed change would raise that amount to a minimum of 5 percent. • Limiting the amount sellers can provide as concessions: The agency is considering lowering the maximum permissible level to 3 percent from its current 6 percent limit. • Raising up-front insurance premiums: Agency staff is reviewing whether to increase the monthly insurance premiums charged to borrowers, which come on top of insurance paid up front. The current up-front premium is set at 1.75 percent of the value of the loan. The FHA may decide to increase that premium. The amount has yet to be determined. According to Donovan, the rules will not be finalized until the FHA determines how to craft them in a way that weeds out the most problematic borrowers while ensuring that qualified borrowers will not be inadvertently shut out, thereby derailing the housing market's recovery. Copyright National Association of Realtors®, Reprinted with permission

Here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy. "Borrowers are going to have to prove they are the borrower they say they are," says Keith Gumbinger, vice president of HSH Associates, a mortgage-industry publisher in Pompton Plains, N.J. Gumbinger says homebuyers should consider these things before they apply for a loan. 1. Down payments are critical. Borrowers should expect to put down at least 10 percent for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase. 2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates. Rich Bira, branch manager of FCM Direct Lender in Chicago, says: "A score between 720 and 739 gets 0.125 percent added to the rate, a score between 700 and 719 gets 0.375 percent added to the rate, and a score between 680 and 699 gets 0.5 percent added to the rate.” 3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration. 4. Unearth the records. Before applying, borrowers should organize tax, banking and other records that prove income, savings and debts. They should also expect to be patient about what may seem to be endless requests for information. 5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43 percent of gross income is important. Copyright NATIONAL ASSOCIATION OF REALTORS®, Reprinted with permission. Source: Chicago Tribune, Mary Umberger (02/15/09) Contact me today to find out how I can help give you an advantage in today's market PRIVACY NOTICE: Please note that any information you provide when contacting me will not be sold or otherwise shared.

IMPORTANT CONSIDERATIONS WHEN SEARCHING FOR YOUR NEW HOME

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