The Federal Housing Administration (FHA) announced home loan changes that will become effective April 5, 2010.  The measures are intended to help the FHA better manage its risks, while continuing to provide affordable, responsible mortgage products that will support the housing market’s recovery.

Here’s what’s changing:

1.  Increased mortgage insurance.  The mortgage insurance premium will increase from 1.75% to 2.25%.  This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing.

2.  New down payment and credit score requirements.  Buyers who have a credit score of at least 580 may still be able to purchase a home with a 3.5% down payment, but those with credit scores less than 580 will be required to put down at least 10%.  This change is designed to help the FHA balance its risk, while providing affordable down payments for consumers with good credit history.

3.  Reduced seller concession.  Home sellers may offer the home buyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

To find out if an FHA loan is right for you or if an FHA loan is even possible on property you’d like to purchase, contact Michael Zimmerman for referral to a great mortgage professional.

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