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The Carrot and The Stick From FHA

While we've posted recently about the FHA easing up on some restrictions and rules related to condominium loans, there's discussion in the FHA and with policy-makers about various new rules and limits that could make it more difficult overall to get a new FHA mortgage.  While the FHA is in better financial condition than a year ago, there are rule-tightening measures being considered, including:

  • Raising minimum credit scores to get an FHA loan
  • Increasing minimum down payments from the current 3.5% to 5% or more
  • Sellers can currently contribute up to 6% of buyer closing costs, but a cut to half that, or 3% maximum, is being considered
  • Increasing annual and upfront mortgage premiums for borrowers

Those are the possible changes for borrowers, but there's more possibly coming for lenders as well.  The FHA is proposing more stringent controls and scrutiny of the activities of lenders.  The goal is to make them more accountable for their actions and the loans they originate.  These proposed new rules and tightened restrictions create a dilemma for Congress.  With the FHA currently involved in 30% or more of housing loan activity, there is a fear that more stringent rules will slow down recovery in the housing markets.

Observers seem to think though that many of these new rules and policies will be considered and possibly passed.  However, the increase in the down payment minimum is one that likely will not happen.  There is a window of opportunity here if you've been considering a home purchase.  With the extended and expanded home buyer tax credits in effect for the next few months, it's a time when you may be able to beat some of these new rules to your closing, and get a nice tax credit to boot.

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