Changes to FHA Standards will affect home buying

Posted By Marshall Walker @ Jan 21st 2010 6:30am In: Mortgage

The FHA, which is supporting the housing market by insuring thousands of new mortgages, is expected to announce on Wednesday that it is tightening standards.

Borrowers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.

Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.

Borrowers who want to put the minimum down will now be required to have credit scores of at least 580

The new measures are aimed at shoring up the agency’s finances while also screening out unprepared borrowers.

Left largely untouched by the changes is the most controversial aspect of the agency’s program: a provision allowing buyers to make a down payment as low as 3.5 percent. Private lenders these days require at least 15 percent.

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