FHA Alert

This spring, FHA will be instituting some major changes that could affect your pocketbook and your ability to purchase a home.

The FHA up-front mortgage insurance premium will go from 1.75% to 2.25%. This means that for a $200,000 mortgage, the mortgage insurance premium will rise by $1000. Although this amount is usually rolled back into the loan and financed, it means that at a 5.50% interest rate, you will be paying an additional $5.65 per month or $2034 over the 30-year life of the loan.

FHA used to be the last resort for buyers with less than stellar credit. That, too, will be coming to a screaching halt. FHA will be requiring a 10% down payment from buyers with credit scores of less than 580.

One last bit of bad news for those who require a seller to pay closing costs or seller concessions as they are known in the mortgage industry. Sellers will now be able to contribute no more than 3% or the purchase price towards buyers closing costs -- down from 6% -- which means that buyers may have to come up with more money out of pocket in addition to the down payment.