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January, 21, 2010 | 11Comments

Chief Economist Cameron Findlay on CNBC - LendingTreeThe Federal Housing Administration (FHA) released a statement yesterday saying they were raising borrowing costs for those obtaining FHA insured loans. The mortgage insurer has taken severe hits to its balance sheet over the past few years as a result of rising defaults in the mortgage market, and the move to higher fees marks an attempt to better account for risk and replenish its congressionally mandated capital reserves.

The main changes to the insured loan program are:

  • Seller concessions reduced from 6 percent to 3 percent;
  • Upfront mortgage insurance premiums raised from 1.75 percent to 2.25 percent; and
  • Borrower’s must have a FICO score of 580 or better, unless they put at least 10% of the purchase price down.

The required down payment on FHA insured loans stays at 3.5 percent of the purchase price of the home for borrowers with credit scores above 580.

The change in upfront mortgage premiums will cost potential borrowers an additional $500 per $100,000 financed. However, there’s a good chance the other changes will not have a significant effect on most home buyers.  Since actual loan dollars come from HUD’s lending partners, those groups set the ultimate underwriting guidelines and make final approvals for FHA insured loans.

For instance, while the FHA is now requiring a minimum credit score of 580, most commercial banks making FHA insured loans have already been charging borrowers with credit scores lower than 620 higher interest rates and requiring larger down payments.

Regardless, it is not clear yet just how many borrowers will be affected by the changes, and whether or not this is a sign of more changes to come within FHA guidelines.

  • Cheryl

    Why is the gov’t ALLOWING the banks to charge higher interest rates for those above the 580…doesn’t that DEFEAT the whole purpose. Obviously, those with credit scores that low have NOT been able to meet the payments. So, why either reject them out of hand or make the payments with the higher interest rates that create the same situation over again??

    The Program as with so many are fouled to the point that they are POINTLESS!

  • caralee cowen

    Looking for a 30 year fixed ,no points or fees, for 275000. Already have a 5.25 30 year fixed.

  • Gregory Sevachko

    What refinancing loan products are available to the person who has a credit score of excellent, been making payments on time since 12/07 for a Bank of America mortgage of $248,000 at 6.75 % with market value of $180,000?

    Why is it the government penalizes people who are responsible and rewards those who are not who go the forclosure route?

  • Florence Levy

    Scott call me at 212-523-4087 so we can discuss refinancing
    Thanks
    Florence

  • elizabeth scalise

    As I previously stated in a previous e-mail we would be interested in re-finance with a cash out of $5,000. if the rate were to be in the low 4.% range in order for us to have a lower mortgage payment. If this is possible please e-mail me. at the above e-mail address. I filled out a request for a loan for $146,000 as our current balance is 141,000. and mortgage payment with taxes and insurance is $1085.79.

    Thank you
    Anthony & Elizabeth Scalise

  • elizabeth scalise

    Loan type to be FHA 30 year or if available a 25yr loan

  • c

    I am looking for a loan 30-year fixed, balance 206,000 low 4%, total fees not to exceed $3,000. I have excellent credit. Is there a loan for people who have done all the right things? Also I want the loanee to pay for an attorney of my choice who will review the loan for predatory lending practices. Any takers. I think a lot of people out there are afraid to apply for these loans because they do not trust the lenders and their fine print.

  • Samuel Thonen

    Yes we are still interested. Need to talk, my phone is 352-795-5116.

    Best time M – F after 6:30pm Sat Sun 10am to 6pm

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