New FHA Guidelines and What They Mean To Home Buyers
Realtors and potential homebuyers alike will appreciate this abridged version of what to expect from the Federal Housing Authority's latest attempt to stabilize the housing market.
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Transcript
JOHN: Hey, John Jones here. Tuesday Morning Coffee. Very important news that came out this past week in regards to FHA new guidelines that are coming down the pike this summer, late spring or this summer. What does it mean? Here’s the couple of things that they have changed. Not as bad as we thought they were going to be, but still definitely going to make an impact on how much the buyer has to bring to closing. First thing is mortgage insurance premium. It’s going from 1.75 to 2.25. This increase on a $200,000 house will be about $1,000 for the buyer up front.
Decrease in seller contributions. The seller could contribute up to 6% towards closing costs and those kinds of things. Now it’s down to 3%. The new guidelines are when they go into effect, this will have an impact. It’s not severe, but it will have an impact on how much the buyer has to bring to closing or how much they can work with the seller on paying their closing costs. FHA will also tighten their credit scores to a 580 minimum. This won’t have much impact at all because most lenders right now are requiring at least a 620 anyway.
What does this mean for the typical buyer? It’s going to mean more money out of pocket to buy a home, bottom line. Between the two things, the mortgage insurance premium rising or increasing and the seller can only pay so much in closing, it will cost more money for a buyer to buyer a home. Once again, let me reiterate. This has not gone into effect yet. We’re not sure when. We think late spring, early summer. And let me also reiterate this is the best time in the history of the world to buy a house.
If you don’t, you’re crazy. Right now, first time homebuyers especially, the government’s going to give you $8,000. You can still get rates under 5% or right at 5%, 40-year lows on those and you are buying in a depressed market. So if you can buy and you’re in an area that you’re going to be in for a while and you have the ability to buy a home and you don’t, seriously, you need your head examined. You need to go get deep, deep psychotherapy or call me. I’ll give it to you. If you need anything, guys, any questions about this stuff, JohnCJones.com. Thank you.
