For years, FHA (Federal Housing Administration) have long been a staple of first time and lower income home buyers. In general, FHA loans allow a buyer to have lower credit scores and a bit more debt, along with lower down payments, than conventional loans.
As you might imagine, the housing crisis was especially hard on the Federal Housing Administration. The National Association of Realtors reports that an independent audit shows the FHA has an economic value of negative $13.48 billion. Over the past few years FHA has been making a variety of slight adjustments; increases in their mortgage insurance and funding fees. This spring brings another wave of changes in an effort to stem the tide.
The two most notable changes are:
1) Raising the annual mortgage insurance premium by 10 basis points, or about $13 per month on the average loan.
2) Making the mortgage insurance permanent; meaning MIP can no longer be removed once an owner achieves 20% equity. Keep in mind though, the average FHA loan turns over quicker than conventional loans as they are often used to buy that first, starter house.
These changes to FHA are a balancing act; address FHA's financial strength (or lack of it) without putting a damper on the now recovering housing market.
Read the FHA report here.
What does this really change?
ReplyDeletea bit more income for FHA to start trying to offset that negative "economic value". But...as some conventional loans ease their requirements, we expect to see some buyers qualifying for and using conventional loans instead.
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