The Federal Housing Administration has reported being in trouble for some time now. In order to get them back on track, they have made a few adjustments.
Borrowers who are applying for the 30 year fix and putting down 5% or more will now be subject to an annual premium of 1.3% of the outstanding balance. This is a 0.1% increase over the previous 1.2%.
Those with jumbo loans ($625,000 or more) will have their premiums increased 5 basis points. The maximum amount financed will also be 95% now.
Insurance premiums will not fall off now as they did previously when the loan-to-value (LTV) ratio hit 78%. This applies to any borrowers putting 10% down or less.
There were also some tighter underwriting guidelines put in place (which make absolute sense). They require manual underwriting for any potential borrower with a less than 620 FICO score and above 43% debt-to-income (DTI) ratio.
Limitations on the amount upfront payments retirees can take through reverse mortgages have also been put in play.
All of these changes seem reasonable considering that FHA is subsidized by taxpayers’ money. FHA loans have become somewhat high-risk for the lenders which should have never happened. We will just have to see if this helps them climb out of their hole.
*We are not a lending institution, nor a mortgage broker. This is simply an industry update. For the complete details or to see how this can affect your loan, contact your lender.