First Time Home Buyer FHA loans

Panel Tells Congress FHA Should be 5% Downpayment

fha_pmi ratesLast fall FHA reported to Congress that they had a loss on their books, mostly from the loans made between 2005 and 2009. This is not surprising, and to create a situation where they would not need to ask Congress for more funds – FHA Announced two changes to FHA PMI that will go into effect later this month.

An independent (conservative) panel which included Director Julia Gordon of Housing Finance and Policy at the Center for American Progress, spoke to the House Financial Services Committee this week:

Similarly, real estate professor Anthony Sanders with George Mason University said there needs to be a shrinkage of the government’s footprint in housing.

With the FHA’s share of mortgage originations at more than 25%, it’s time for the agency to shrink back to its previous size, such as in 2003 when it’s market share stood at 10%, Sanders said.

Thus, to protect households and taxpayers Sanders encouraged a FICO-score floor of 660 for FHA-insured loans. Additionally, the FHA should adjust to a minimum down payment of 5% and also lower the loan limit to $625,000 and eventually to $350,000, Sanders asserted. Finally, the agency should lower the insurance coverage to 80%, the professor suggested.

“All these measures can serve to reduce the FHA’s substantial, high-risk footprint in the mortgage market,” Sanders told the Committee.

This is not the first time that the suggestion of a 5% down payment for FHA has been suggested – and indeed it might be the guidelines determined later this year… however, if the Minimum Credit Score requirements go to 660, this will STOP many first time home buyers from purchasing homes.  Earlier this month, NC Housing announced that they are going to do away with a program that allows us to approve mortgages with 2 scores over 600.

EVERYTIME credit score requirements go higher – we LOSE a HUGE pool of potential buyers in North Carolina.  Are these all people with CRAPPY credit?  NO!  Most of them are folks who simply have not been in the Work Force and Credit Scoring models long enough to have the higher scores!

We hope that FHA will decide against these suggestions.  FHA PMI in 2013 is going up in a “small” fashion – and they have decided to leave the FHA PMI on the loan for the “life” of the loan, in most situations (meaning it will no longer age off after you meet a loan to value of “X”).

If you are interested in getting more information about refinancing your FHA mortgage, let us provide you with the FHA Pre-Qualified Buyer options!  We will give you some of the best mortgage rates today and the lowest cost!  Call Steve and Eleanor Thorne 919 649 5058.  We work for a small Community Bank out of Virginia – and we would love to be YOUR lender today!

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