Orlando Home Buyers are Best to buy before new FHA guidelines take effect
Starting in early summer, the Federal Housing Administration is tightening lending standards in an effort to bolster its dwindling reserves. The new lending standards will make it tougher for some prospective buyers to purchase a home by requiring a higher down payment than the typical 3.5 percent for some borrowers, higher insurance premiums and reduced seller concessions.
Securing FHA-insured mortgages are attractive to borrowers because down payments are only 3.5 percent. Most conventional loans now require 20 percent down, keeping many creditworthy borrowers on the sidelines.
New Guidelines
The new rules — which are temporary and take effect this summer — come after more than a year of stringent standards from lenders. Among them:
- Better Credit Score — New borrowers will have to have a minimum credit score of 580 to qualify for a 3.5 percent down payment. Previously, there was no minimum score. Those with lower scores will have to make at least a 10 percent down payment. The average credit score of FHA-insured borrowers is 693.
- Higher Insurance Premiums — Buyers who get an FHA-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of total loan amount, up from 1.75 percent now. A $100,000 mortgage would require a payment of $2,250, or $500 more. But buyers can roll the added cost into the loan amount.
- Reduction in Seller Concessions — Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.
FHA removes anti-flipping rule
Another FHA rule change could help foreclosure-plagued markets like Las Vegas, Phoenix, Miami, Detroit and Los Angeles, making it easier for investors to “flip” houses to buyers who use FHA-insured loans.
Effective Feb. 1, the federal government will waive for one year an FHA anti-flipping rule that prohibits insuring a mortgage on a home owned by the seller for less than 90 days.
The new rule lets investors buy today and re-sell as quickly as possible. The move is to allow REO homes purchased by investors to resell as quickly as possible, helping stabilize real estate prices and revitalize neighborhoods after the U.S. housing market collapse.
This new rule will open up a new pool of homes to buyers. Waiving the 90-day flip rule is being heralded by many real estate investors as a boon to their ability to buy, rehab and resell foreclosed homes on a more efficient time line.
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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.
P.S. If you are listing your home as a short sale in Orange or Osceola County Florida and Orlando, Windermere, Winter Garden, Kissimmee or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales
