There has been a lot of talk about FHA home loan programs in recent months. It has been no secret that HUD has tightened FHA guidelines in an effort to stem foreclosures and FHA loan defaults nationwide. The Federal Housing Administration already tightened the FHA streamline program so FHA customers can no longer finance closing cost with the streamline refinance loan. Many of the FHA borrowers with good credit have been able to find FHA lenders offering no cost FHA streamline refinance offers. This is the situation in which lenders are paying streamline closing costs in an effort to win the borrower’s business. In most cases no cost streamline loans are approved for borrowers that have a high credit scores and low debt to income ratios.
With FHA rates still be recorded at all-time lows it’s hard to understand why low fixed mortgage payments are not enough of a motivation for first time homebuyers. Yet sluggish reports continue to be reported weekly with low FHA purchase loan activity. The housing sector continues to wait to see if the home buying market can rebound since the expiration of the first-time homebuyer tax credit. The FHA has remained aggressive with the FHA loan guidelines as borrowers still only need to come up with 3.5% of the down-payment.
The FHA has promised to lower allowable seller concessions (the percentage sellers can take from the sales price of a home to fund closing costs). FHA will reduce seller concessions from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set. The FHA closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. FHA down payment assistance is not included as a closing cost.
