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What You Need to Know About Upcoming Changes to FHA Loans

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Things to Know About FHA Loans <ul><li>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. </li></ul><ul><li>Debt-to-Income ratios up to 43%. </li></ul><ul><li>Loan-to-Value ratios up to 96.5%. </li></ul><ul><li>Downpayment and closing costs can be a gift or a loan from a family member. </li></ul>

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<ul><li>Loan limits up to $729,750 in certain areas. County limits apply. </li></ul><ul><li>Eligible property types include one- to four-family residential homes, condominiums and Planned Unit Developments. </li></ul><ul><li>Appraisal standards have been relaxed by HUD, and are now comparable to conventional loan product appraisals. </li></ul><ul><li>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 . </li></ul>Things to Know About FHA Loans

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Where FHA is Tightening Up <ul><li>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.) </li></ul><ul><li>The Upfront Mortgage Insurance Premium is expected to decrease to 1 percent (currently 2.25 percent). </li></ul><ul><li>Even with the reduced upfront premium, the net effect will be higher monthly housing expenses, requiring higher monthly income to qualify. </li></ul>

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How Much More Income? <ul><li>Example #1 </li></ul><ul><li>Home priced at $250,000 </li></ul><ul><li>Base loan of $241,250 </li></ul><ul><li>The buyer would need approximately $2,000 more in annual income to qualify.* </li></ul><ul><li>Example #2 </li></ul><ul><li>Home priced at $500,000 </li></ul><ul><li>Base loan of $482,500 </li></ul><ul><li>The buyer would need approximately $4,300 more in annual income to qualify.* </li></ul>* Calculations assume monthly property taxes and insurance of $400.

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Seller Contributions May Be Reduced <ul><li>Example #1 </li></ul><ul><li>Home priced at $250,000 </li></ul><ul><li>Previous maximum seller contribution: $15,000 </li></ul><ul><li>New maximum seller contribution: $7,500 </li></ul><ul><li>Example #2 </li></ul><ul><li>Home priced at $500,000 </li></ul><ul><li>Previous maximum seller contribution: $30,000 </li></ul><ul><li>New maximum seller contribution: $15,000 </li></ul><ul><li>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. </li></ul><ul><li>The impact should be minimal, since the majority of seller contributions are now 3 percent or less. </li></ul><ul><li>Two examples assuming the maximum allowable seller contribution: </li></ul>

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Let Me Help You Succeed <ul><li>FHA remains a great way to expand your pool of potential buyers. </li></ul><ul><li>Setting our customers’ expectations properly will help build their trust in Weichert and their loyalty to us. </li></ul><ul><li>I want you to be successful and receive referrals from satisfied buyers. </li></ul>

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<ul><li>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. </li></ul>Together We Are Making the Market! When you succeed, everyone WINS – that’s why YOU make the Weichert Difference!

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Rates Down, Opportunity Up Companywide Market Seminar September 25 11 am