FHA Loans Are Going To Get More Expensive !

If I hear it, I'm sharing it. As a Realtor in Santa Clarita Valley, I network with many different entities and keep poised on new information that comes down the pipeline. So many buyers have been using FHA loans in Valencia and it's surrounding communities that this is extremely important to know.

FHA mortgages are poised to get more expensive ~ Today in the LA Times ~

The Federal Housing Administration (FHA) plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future.  The FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchases across the board.

One reason for the increase in fees is that over the last six years, the number of FHA loans used by buyers has increased significantly.  The housing program is financing 40 percent or more of all new-home purchases in some areas and is a crucial resource for first-time buyers and moderate-income families.  This is especially because of the low 3.5 percent down payment required for most FHA loans. It's been a great loan program for my buyers, particularly when every penny has counted. 

During this span of rapid growth, the FHA’s insurance fund capital reserves have steadily deteriorated – far below congressionally mandated levels.  And delinquencies have been increasing.  As a result, the FHA is under the gun to get its own house in order, cut insurance claims, and rebuild its reserves. Understandable.

Under the changes, the FHA will lower its seller concession cap to 3 percent of the home price or $6,000, whichever is greater.  Currently, the FHA allows up to 6 percent of the price of the house to go toward buyers’ closing costs. Closing the gap will cause less borrowers to be able to buy.

Beyond that change, the FHA also plans significant increases in insurance premiums – upfront premiums will rise to 1.75 percent from 1 percent, effective April 1, and annual premiums will increase by 0.1 percent on all loans under $625,000 and 0.35 percent on mortgage amounts above that, effective June 1. This I knew about from my lender connections.

Damn It! While the majority of my current buyers are non-FHA buyers, it will be a challenge for the next FHA buyer I get referred to me.