Maryland Mortgage Loans and Solutions – Gordon Haraway

There are a number of changes that have taken place recently and more on the way in the FHA loan arena. Some of these changes are specific to certain lending situations so will not effect all loans, while others are global in nature so everyone will be affected. While there have been many changes of late and more possibly to come, this column attempts to highlight the changes affecting the most borrowers .

• Mortgage Insurance: Currently the UP Front Mortgage insurance or (MIP) as it is known is 2.25% of the base loan amount. HUD Secretary Stevens announced this will be reduced to 1.0% while at the same time increasing the annual mortgage insurance from its current 0.55% to 0.90% This change will be in effect as of any new FHA case number issued starting September 7, 2010
• Condo Rules: No more spot approvals, For FHA approval at least 50% of the units must be owner occupied.
• Property Flipping: If a home is resold within by an investor less than one year after the investor purchase. The price appreciation may be limited to 20% of the investors purchase price. A second appraisal may be ordered to justify the new price and documentation may be required of the seller showing substantial improvements have been made to the home. This documentation may include, material receipts, contractor invoices ect. Tell your investors to take a lot of pics, before and after.
• Credit Scores: FHA plans to impose a minimum credit score of 500 later this year, and scores 580 will need a down payment of 10%. Credit scores over 580 will still only need the FHA minimum 3.5% down payment. This rule is really a waste of in on paper since virtually all lenders now requires a minimum credit score of 620 and some are even require a score of 640.
• Seller Concessions: FHA at present allows seller concessions up to 6% of the sales price. The new rule will be 3%. The new rule is expected to have a hugh impact on first Time Home buyers. This new rule is now in a comment period and is expected to be put into effect in the very near future.
• Underwriting Guidelines: Changes have been made to the underwriting guidelines over the last few months. These changes will be incorporated into the revised 4155 lenders manual that should be updated in the near future. Until then all the recent changes are available on Hudclips, (under mortgagee letters) The 4155 lender manual and hudclips are both available on line at the HUD website.

Maryland Mortgage Loans and Solutions – Gordon Haraway Southern Trust Mortgage, specializing in helping home buyers realize the dream of home ownership. Purchase and Refinance home loans. Gordon Haraway is a Senior Loan Officer with Southern Trust Mortgage in Crofton MD (301) 938-1655