Act NOW if you are a FHA Buyer!!
Posted by Louise Scoggins on Thursday, December 3rd, 2009 at 9:15pm.
Changes to the widely popular FHA loan program are currently in legislation…two VERY major changes. The first one under consideration is changing the down payment amount from 3.5% to 5%. The second one is decreasing the amount of concessions allowed from 6% down to 3%.
These are MAJOR changes that will greatly affect a buyer’s cash-to-close if passed. Let’s look at some numbers. On a $150,000 purchase, the current down payment required by FHA would be $5,250, or 3.5%. If the new law changes, that down payment will increase to 5%, or $7,500. That’s a significant increase!
With the concessions, FHA currently allows up to 6% in concessions. This can be used for seller-paid closing costs, repair credits, allowances, etc. 6% of $150,000 is $9,000. Many buyers use this elevated concession allowance to help cover ALL of their closing costs. Granted, most closing costs are not 6%, but many times they are higher than the 3% that FHA is proposing it be changed to.
FHA is a program utilized by many first time homebuyers. The 3.5% down payment is a huge draw for first time homebuyers. The up-to-6% in concessions is also a great negotiating tool for a buyer’s agent to help get her buyers to the closing table with as little money out of pocket as possible. The 6% concessions amount ensures that we can negotiate with a seller so that all closing costs are covered. Dropping it down to 3% will ultimately mean more money out of pocket for the buyer.
So…potential increase in down payment and decrease in concessions allowed means ACT NOW!! If these changes are approved, it may mean you qualify for less home that you would right now, based on the cash you will need to close. The same priced home you are looking at today will actually cost you thousands of additional dollars in down payment and closing costs if these changes pass.
Oh, and did I mention that rates are ridiculously low?? I’m talking 4.5 – 4.78%. And those rates won’t last either…they are slated to go up next year. NOW is the time to buy people! I can’t stress it enough…
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Louise Scoggins
Metro House Hunters, Inc.
Phone: 678.520.5382 | Email Us
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