It seems that HUD is continually making changes to its FHA loan program. FHA has already changed the seller contribution toward buyer’s closing costs by lowering it from 6% to 3%. I can see why. Sometimes a buyer will pay more for a home if the seller will pay the buyer’s closing costs, and a higher price means the price could be inflated.

On October 4, the primary new changes will be the cost of the MIP and the upfront fee. The MIP factor is moving from .55 to .90. That means a buyer might lose purchasing power and qualify for a lower-priced home than before this change. That difference in sales price could amount to $10,000 or more.

The upfront premium, which is often financed into the loan, is being reduced from 2.25% to 1%. On the surface, that seems like a good move for FHA because it means the borrowers will be financing a smaller mortgage. FHA is one of the few loan programs where a buyer can put down all of this money and watch it vanish as the mortgage gets bigger.

The minimum down payment requirement is still 3.5% of the sales price; however, borrowers with FICO scores below 580 will no longer qualify for an FHA loan. Moreover, those with FICOs between 580 and 619 will pay more than a borrower with a FICO of 620, so be careful.

If you’re thinking about buying a home and getting an FHA loan, you might want to apply for the loan before October 4th. You’ll probably save money on that mortgage insurance premium.

View the original article here