Monday, September 24, 2007

Proposed Changes to FHA Loan by Brian Brockman with Plaza Mortgage

NOTE: this bill has been proposed but not yet passed.

FHA Modernization Bill. Key provisions include a sales price limit increase to $271,050 in our area. There is a possible increase to $417,000 and to $730,000 in some areas. The increase to $271,050 would be effective immediately and higher limits may follow depending on how the bill is passed.

It is possible that the down payment would be lowered to 1.5% but then the upfront MIP would have to be included for a total of 3%. The House version includes a $0 down provision but it's doubtful it will be adopted.

The bill would also facilitate the acceptance of Fannie and Freddie condominium projects.

The Senate Banking Committee has approved this bill and there is bi-partisan acceptance. We should expect the process to be completed and signed by the President in the next 30 days.

What does it mean to you? More sales qualify for FHA due to a higher loan limit.
Since FHA is credit history and not credit score driven, more buyers are eligible.

Some FHA reminders - 1) Seller may contribute up to 6% of the sales price, 2) no termite inspection required unless appraiser sees obvious damage, 3) no non-allowables required to be paid by the seller, 4) buyer may currently be in a Chapter 13 bankruptcy, 5) loans are assumable - important if rates go to 8%, 6) Occupying borrower not required to have income. Great for parents buying for a college student!

Remember this bill has been proposed and not yet passed!

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