Just as we suspected would happen, FHA has now had some major changes and it is now going to cost you more out-of-pocket money to purchase a home.
New - Sellers concessions are limited to 3% of the purchase price.
New - Upfront mortgage insurance premium is increased to 2.25%.
Here is an example of what the lower sellers concessions to the buyers will look like for you:
If you are purchasing a $50,000 home the seller will only be able to contribute $1500 to help you with closing costs, pre-paid items and/or tax prorations. (This same purchase before the new FHA guidelines would have meant $3000 in help to you.)
Many of you are thinking of using your income tax refunds to help you purchase your first homes this year. Often you think that it will be more than enough money with some extra for furnishings, repairs, etc. That may not be the case anymore. You may need every last dime of that refund for your FHA down payment (3.5% of the purchase price) PLUS money for closing costs and pre-paid items.
When you receive your income tax refund tuck it away in your savings account. Have a conversation with your mortgage lender about how much you will need to bring to the closing table for that new home purchase. Save every penny that you can - you're going to need it.
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HUD is definetely putting a lot more restrictions for buyers. . but I feel this is a good start
While a majority of my clients use FHA loans this is going to hurt my business. Cold hard cash is a rarity it seems.
Fernando, it may be a "good start" for some areas, but for my neck of the woods it is going to stall our housing recovery even further. My prediction only...
Laura, It's going to hurt here also. Greatly so.
Kris - Although the intentions of FHA are good, it will certainly make it tougher for that first time homebuyer ! I expect to see a slowdown in the market as a result mid-year on.
The increased cost and reduced allowed seller concession will make it more of a challenge for some.
Kris,
I understand that some of these changes are required by law. I do agree with you though, its going to have a chilling affect on some markets.
Rich
Kris, It's a shame to hear anything that will make it more difficult for first time homebuyers. Especially with some wonderful deals on the market.
Christopher and Stephanie, In my opinion they should have raised the upfront premium last year, and then everything else that has been changed wouldn't be necessary. It's going to be fun..
Gary, It will indeed. For many..
Richard, I understand that, with the exception of the decrease in allowable sellers concessions. That one I don't "get".
Carole, It's going to be another set of hurdles that first time buyers don't need right now.