Beginning October 1, 2008 FHA, Federal Housing Administration will increase it's minimum down payment amount for loans from 3% to 3.5%.
On a $200,000 home this would be an additional $1000 down to a buyer.
Is this a concern to buyers, lender and REALTORS?
FHA has tighten it's guidelines in the last couple of years.
Will this squeeze some buyers out of the market?
FHA will also no longer allow charities to provide down payments or down payment assistance to buyers. I know that in 2004-2006 many buyers used charity assisted down payments in order to purchase homes.
This could put a pinch of some buyers, that may not be able to qualify for a loan without this type of assistance.
Only time will tell if these new "adjustments" to FHA guidelines will affect buyers.
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that for you
Darn, now I have to find buyers who actually have money in the bank.
Sandy
Good information, yes FHA will require the additional down payment, but it's the best game in town.
Good luck and success
Lou Ludwig
For additional information about Lou Ludwig go to www.LouLudwig.com
It is going to have a significant impact on the real estate business!
Hi Mike, In may not be too much of an effect on too many. But, I know that for some first time buyers it gets really tight, and that additional .5% is the difference between whether they can buy or not. Best wishes and take care of yourself!
If I had to guess, I'd say that the reason that for the 0.5% increase is simply due to the huge number of FHA loan applications. I think FHA is simply trying to dig out from under the volume of business by eliminating some of it from flowing in in the first place.
Hi Lou, Yes, I do agree that today FHA is the best deal in town. But times are tight for all right now. Have a great weekend!
Hi Susan, I think that the biggest crunch we will feel is from the buyers no longer able to receive the charity contributions. I know there were soooooooooo many of them in the last couple of years that were receiving thousands of down payment assistance. With that dried up now, I think that could be a huge concern for many! Hang tight and let's see how it all goes!
Hey Michael, That's an interesting perspective. I suppose I hadn't really thought about it like that though. I would think that they would welcome the business. HMMMMM. I wondered if they were trying to weed out the "best of the best" in borrowers, by requiring a bit more money down than previously, so as to be a bit less of a risk to them. Thanks for your thoughts on this! Take care!
Sandy,
Seems like it is becoming more difficult. Buyers can still get a gift from someone...
Happy Labor Day,
Ann
Hey Ann, Good point...thank goodness they can still get a gift from someone else. That's definitely a good thing. You have a wonderful weekend also!
There are far more great things about FHA than what you are losing with these changes. To my knowledge you can still do quite a lot in regard to gifts and seller contributions. Since the values are still coming down, the $200,000 house is probably going for $190,000 which just lowered their overall downpayment.
The market is such that a buyer should be able to create a budget and save some extra money and still find a home.
Thee are a variety of allowable ways for a borrower to amass a down payment as fortunately it will probably be a buyer's market for a while to come.
Hey Sandy,
Now all the buyers have to do is find someone willing to give them a gift of money. Not easy to do in this day and economy.
Ann
While this looks like a done deal, it isn't a sure thing for October 1st. This could be pushed back to 2009. The think that will change is the amount of upfront mortgage insurance. It will go up to 1.75% of the loan amount. It is currentlybetween 1.25% and 1.75% depending on LTV and credit scores.
David, Thanks for your perspective. I appreciate your point of view! Have a wonderful holiday weekend!
Hey Patrick, Oh, good information. I hadn't heard that it could be pushed back to 2009. Thanks for sharing!
Having to put down 3.5% and complaining about it is ridiculous. What happens if the furnace goes out? The reason we have this mess is that standards, including FHA have been reduced to "breathing on a mirror-you qualify" This will help shore up an already bad platform and maybe we won't have to bail it out like all the other clearinghouses. Realtors can be for all people have a chance at homeownership, but we will be tarred and feathered unless we stop pushing loans where there is no buyer monetary input.
Hi Dale, Well, we have yet to see whether or not buyers will be complaining about the additional .5% requirement. Whether a buyer has 3% down or 3.5% down, it still is not going to make any difference as to whether they have the funds to fix the broken furnace you mentioned. And it remains to be seen whether this will put some buyers out of the market. I have to say that the last 5 buyers that I have worked with in the past couple of months have all been FHA first time homebuyers, getting assistance to purchase homes. In our area, they seem to be the buyers that have jumped off the fence to purchase. So, it will be interesting to see how this plays out. Thanks for your thoughts!