Securing an FHA mortgage is about to get more expensive.
In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.
For consumers, the changes mean higher costs.
As listed in the official announcement, there are 3 major guideline updates for the FHA:
Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.
To read the FHA’s statement, it’s clear what the group is trying to balance. On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.
To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.
Also in its new policies, the FHA is introducing a “termination clause” that states if banks or loan officers produce more than their fair share of bad loans, they will lose their right to originate FHA mortgages.
As a result, homebuyers should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”. Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.
Some have other guideline overlays, too.
The FHA’s new guidelines don’t go into effect until this spring. So, between now and then, the old guidelines still apply. Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.
If nothing else, you’ll save some money at closing and on your monthly payment.
November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program. There’s 100 days left to claim it.
The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.
In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit. If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.
Move-up buyers are capped at a total tax credit of $6,500.
The tax credit’s basic eligibility requirements remain the same:
The new law includes some notable updates, however.
First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible. And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.
And lastly, don’t forget that the program is a true tax credit — not a deduction. This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.
The complete list of qualifying criteria is posted on the IRS website. Review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2010.
There’s just 100 days to go.
2010 is just a few days old and already the “experts” are making predictions for the year.
Housing calls and mortgage rate predictions run the gamut:
Given how varied their outlooks, it’s clear that the professionals have no better view of the future than the amateurs. An expert can make an educated guess, but it’s a guess nonetheless.
Last year, Wall Streeters predicted a 25% pullback in home prices. 12 months later, we know prices didn’t fall. Wall Street also predicted higher mortgage rates for 2009. That prediction was fulfilled.
There’s a lot of talk on CNBC and elsewhere about what’s coming in 2010. Before you take those predictions to the bank, just remember that analysts do a much better job interpreting data from the past than projecting it into the future.
The only thing that’s certain right now is that mortgage rates are historically low, the government is giving tax credits to qualified buyers, and there are a lot of good “deals” in housing. Make the most of what’s out there today because it will take 12 months for us to look back and know which predictions were right and which were wrong.
Until then, predictions are just opinions and guesses.
First Heritage Mortgage, LLC
6550 Rock Spring Drive, Suite 260, Bethesda, Maryland 20817-1131
Direct: 240.223.1730 • Toll-free: 866.833.LOAN • Fax: 240.223.1703
