Changes in FHA

If you are a first time home buyer and you are looking to buy a house but don't have a lot of cash to put down, FHA financing is still a good and viable option.

The attractive aspects of FHA financing are two-fold: flexibility regarding credit and the low downpayment requirement.

There are some changes occuring in FHA financing, an effort on their part to improve the health and strength of the program.

If your credit score is less than 580, you will now be required to put a 10% downpayment on the house. Before the new ruling, you were required to put only 3.5% down. Regardless, 580 is still an achievable credit score.

Another change is that the seller can only contribute 3% towards closing costs, whereas before, the FHA allowed up to 6%.

And then, finally, the agency has increased the required Mortgage Insurance Premium from 1.75% to 2.25%; the result of this change will be an increase in monthly payments.

In sum, these changes will require the buyer to have more cash on hand for closing costs and perhaps a lower priced home in order to cover the increase in monthly payments resulting from the change in Mortgage Insurance. None of these changes are severe enough to create any huge change in demand for FHA financing.