Chicago First Time Home Buyer: FHA Changes Are Here, Sort Of
ByChicago First Time Home Buyer: FHA Changes Are Here Sort Of
Well HUD officially announced changes to FHA loans which will start taking effect in April. HUD announced the following changes will effect both purchase money transactions as well as refinance transactions. Chicago first time home buyers will definitely be affected by these changes. If you are currently in the market for a new home or looking to refinance your current home you should definitely pay close attention to these changes. The changes that are being imposed on FHA loans are the following:
1. Upfront Premiums increase
The current upfront mortgage insurance premium charge is 1.75%. On a $200,000 mortgage this is currently a charge of $3500 which is added to the loan amount on an FHA loan. The change which will be in effect for FHA case numbers that are assigned on or after April 5, 2010 will increase the upfront premium to 2.25%. On a $200,000 this will mean an additional $1000 cost to the Chicago first time home buyer.
2. Updated credit score and down payment requirements
New borrowers will have to have a minimum of a 580 credit score to qualify for the FHA minimum 3.5% down payment. Borrower with less than a 580 credit score will be required to put down at least 10%. This really will not affect Chicago first time home buyers because almost every lender has raised their credit score requirements to a minimum 620 credit score. This requirement will go into effect early in the summer.
3. Reduced allowable seller concessions from 6% to 3%
Currently sellers are allowed to give the borrower a credit of up to 6% towards closing costs. With the new change the maximum seller contribution towards closing costs would be 3%. This means if a Chicago first time home buyer were to purchase a $200,000 home the maximum seller credit would go from $12,000 to $6000. This change will also go in to effect early in the summer.
4. Increase enforcement on FHA lenders
This change will not affect Chicago first time home buyers directly. HUD will be monitoring FHA lenders more closely and is looking at increasing the enforcement on FHA lenders.
There is also talk that HUD may look to increase the monthly mortgage insurance premium down the road which in turn would increase the monthly mortgage payment. While some of these changes do not take affect until the early summer Chicago first time home buyers will definitely not want to wait until April to find their new home. With the changes that take affect in April and early in the Summer Chicago first time home buyers could potentially lose $7000 on the purchase of a $200,000 home. That sure is a whole lot of money to throw out the window.
