In case you are not aware yet, FHA has made some changes recently. Some of these changes are effective today, and some are expected to be effective ‘this Summer’. To view changes other than the topic of seller contribution, please type the term ‘FHA’ into the search bar in this site and scroll through the different Blog articles I’ve written.
The change regarding seller contribution is one of those changes not quite specific on the effective date, so everyone is aware that it will become “law” by this Summer. Honestly, it’s not really a big change. Most of the time, 3% will cover all closing costs, unless you are talking about a home under say $110,000. Closing costs for a home between $110,000-$271,050 is probably going to be $7,000 on the high end and $4,000 on the low end. Say you are buying a $100,000 home and need help. If closing costs are typically $4,500 for that house, the 3% will pay the first $3,000 of those costs, and if the buyer can’t come up with the additional $1,500, the Loan Officer can always ‘bump’ the rate and waive his costs. Boom! Problem solved. Now when you get the say $200,000 values, you are talking about getting $6,000 in seller help. That should be plenty.
The purpose of this Blog isn’t to warn you about the change because this change could keep you from affording the closing cost, but so that you don’t add more seller contribution that you can use on the contract and give away money that you can’t use. Make since?
I copied this from the letter written by Assistant Secretary of Housing for HUD…David Stevens.
| Recently FHA announced significant changes to strengthen its capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for under served communities. These changes are the latest in a series of efforts we have undertaken to better position FHA to manage its risk while continuing to support the nation’s housing market recovery. |
This above here is the excuse for some of the changes that have been made that have made FHA underwriting more strict. All in all, this is saying that FHA is having trouble making or keeping a profit and this are the measures that must be taken to keep them afloat. In closing, I have a thought to leave you with.
We are in a terrible market, in comparison to the typical economic and housing market that American has become accustom to in times. FHA decides to make these changes that will force Americans to spend more money on their loan, while FHA needs to support. Once the market gets back to ‘BULL’ status, do you think FHA will announce a release of these changes that have become more expensive to get them through these times, or do you think they will just keep on trucking. “Things that make you go, HMMMMMM”….
Malita Jones says
Hopefully this will help those that don’t have cash reserves for closing costs – but buyers have to remember there is a strategy to getting what you want in an offer – don’t beat up a seller on the asking price then ask for closing costs then expect to get a load of cash in repair negotiations!