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Here is a great update on changes to that FHA will be making to its loan programs.

Here is a great update on changes to that FHA will be making to its loan programs.

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  • FHA will now require borrowers to have a minimum credit score of 500. Borrowers with credit scores below 580 will have to put at least 10 percent down. These FHA requirements won’t affect Weichert customers, as WFS will continue to require a minimum score of 620 – although other lenders are requiring scores of at least 660.
  • Based on 30-year loan @ 4.50% with taxes and insurance of $400/month Housing expense ratio of 31% with monthly debt not exceeding 12% of income (total debt ratio of 43%) Reflects upfront MIP decrease to 1% and monthly MIP increase from 0.55% to 0.90%
  • Note: the reduction in seller contribution has NOT been finalized, but the expectation is that the max will decrease to 3%

Transcript

  • 1. What You Need to Know About Upcoming Changes to FHA Loans
  • 2. Things to Know About FHA Loans
    • FICO score requirements are lower than conventional loans. Although some investors now require a minimum score of 660, Weichert Financial Services continues to approve loans with scores as low as 620.
    • Debt-to-Income ratios up to 43%.
    • Loan-to-Value ratios up to 96.5%.
    • Downpayment and closing costs can be a gift or a loan from a family member.
  • 3.
    • Loan limits up to $729,750 in certain areas. County limits apply.
    • Eligible property types include one- to four-family residential homes, condominiums and Planned Unit Developments.
    • Appraisal standards have been relaxed by HUD, and are now comparable to conventional loan product appraisals.
    • Amendatory clause gives the buyer the right to void the contract if the home under-appraises. Must be signed at the same time the contract is signed .
    Things to Know About FHA Loans
  • 4. Where FHA is Tightening Up
    • The monthly Mortgage Insurance Premium on FHA loans will increase in October from a maximum of 0.55 percent annually to 0.90 percent annually. (This can vary depending on down payment options.)
    • The Upfront Mortgage Insurance Premium is expected to decrease to 1 percent (currently 2.25 percent).
    • Even with the reduced upfront premium, the net effect will be higher monthly housing expenses, requiring higher monthly income to qualify.
  • 5. How Much More Income?
    • Example #1
    • Home priced at $250,000
    • Base loan of $241,250
    • The buyer would need approximately $2,000 more in annual income to qualify.*
    • Example #2
    • Home priced at $500,000
    • Base loan of $482,500
    • The buyer would need approximately $4,300 more in annual income to qualify.*
    * Calculations assume monthly property taxes and insurance of $400.
  • 6. Seller Contributions May Be Reduced
    • Example #1
    • Home priced at $250,000
    • Previous maximum seller contribution: $15,000
    • New maximum seller contribution: $7,500
    • Example #2
    • Home priced at $500,000
    • Previous maximum seller contribution: $30,000
    • New maximum seller contribution: $15,000
    • Although not finalized, it is expected that the maximum seller contribution will be reduced to 3 percent of the home’s value (from 6 percent), so the buyer may need to come up with more cash for the settlement.
    • The impact should be minimal, since the majority of seller contributions are now 3 percent or less.
    • Two examples assuming the maximum allowable seller contribution:
  • 7. Let Me Help You Succeed
    • FHA remains a great way to expand your pool of potential buyers.
    • Setting our customers’ expectations properly will help build their trust in Weichert and their loyalty to us.
    • I want you to be successful and receive referrals from satisfied buyers.
  • 8.
    • As your partner in success and trusted advisor, I will keep you informed of affordable market conditions and changes to lending guidelines that may affect buyers and sellers.
    Together We Are Making the Market! When you succeed, everyone WINS – that’s why YOU make the Weichert Difference!
  • 9. Rates Down, Opportunity Up Companywide Market Seminar September 25 11 am