FHA Updated on December 7...

I am sharing the following excerpt from my team leader's email today.. Thanks Kathleen!

After much anticipation the Federal Housing Administration (FHA) has, effective December 7, 2009 made adjustments to its underwriting guidelines. The new rules will expand the number of properties eligible for FHA loans.

The great advantage to FHA loans has been that for qualified applicants and properties the minimum down payment has been 3.5% as opposed to 10% or 20% for conventional non-FHA loans. The tricky part has been that many properties, under the old guidelines, simply did not meet the criteria

Here are some of the more important changes:

• Under the old guidelines the association had to have 4 or more units. Now an association with 2 or 3 units qualifies.
• Under the old guidelines the required owner occupancy in the association was 51%. Now it is 50%.
• Under the old guidelines the maximum amount of commercial space was 20%. It has now been increased to 25%.
• Whereas new projects were ineligible under the old guidelines, now FHA, with extensive documentation up front, will give loans on new construction projects.

The House Financial Services Committee is, however, considering a couple of adjustments that would make it more difficult to obtain a FHA loan.    There are some who feel it is too easy for buyers to qualify for the FHA loans and feel that the applicants should have more “skin in the game.”           One proposal is to increase the minimum credit score from the current 620 to 640. The other proposal is to raise the down payment from the current 3.5% to 5%. These proposals have not been enacted. So stay tuned!