• FHA mortgage insurance increase.  First FHA mortgage insurance was going to have risked based pricing, then HR 3221 came along and put a moratorium in effect until September 30, 2009.   Until then, for a FHA purchase 30 year fixed mortgage, upfront mortgage insurance has increased to 1.75% and monthly mortgage insurance is 0.55% for loan amounts over 95% LTV and 0.50% for borrowers putting more than 5% down on their home.
• Down payment assistance programs.  Seller funded down payment assistance programs are currently not allowed.  However there is a bill in Congress (HR 6694) that if passed, would allow these once again, but only to borrowers within certain credit scores.   Home Buyers can still obtain a gift or loan from family members as long as it meets Underwriting guidelines.
• Rental income credit when buying a new home and renting the existing residence has changed.  This actually became effective in mid September.   When converting a primary residence to a rental home, the rental income can only be used for qualifying if the borrower is relocating or the new rental meets at least 25% equity (to be determined by an appraisal less than 6 months old or the existing mortgage balance is 75% or less of the original sales price).   Both mortgage payments are factored for qualifying purposes. HUD (and Fannie/Freddie) have cracked down on this due to home buyers purchasing a new (less expensive) home and “walking away” from their larger mortgage payment.

Effective January 1, 2009:

• The minimum down payment increases to 3.5%.  Home Buyers have until the end of the year to purchase under the 3% down payment requirement.   Sellers can pay actual Closing Costs once the buyer meets the minimum down payment requirement (which can be gifted or loaned by a family member).
• FHA Jumbo loan limits are changing.   HUD is in the process of reevaluating median home prices and will announce new loan limits before the end of the year.  With the passage of HR 3221, the maximum loan amount for FHA Jumbo was reduced to 115% of the median home price (currently $295,000 in Wake County and $331,250 for Orange County).   However, some areas have not had their values reevaluated by HUD in several year.  So, for now, we really don’t know what the new “FHA jumbo” loan limit will be.

• Not all lenders are approved to originate FHA loans.  Check HUDs site to verifyif the mortgage company you work for is approved.   Charging more than a 1% origination fee is not allowed.
• FHA does not have income limitations or geographic requirements.
• FHA is not limited to first time home buyers.
• FHA is not just for lower credit scores.

• Tighter guidelines. 
• Risk based pricing on credit scores below 740. (FHA has risk based pricing starting at 620 and below).
• More expensive private mortgage insurance for loans over 80% loan to value.

 
William "Art" Sexton
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