Mortgage Market Update: Are FHA Changes Coming Soon?

Conventional 30-year fixed mortgage rates are floating around 5%, which is a slight improvement over the past week, but most analysts believe such low rates are not likely to last.  There are also persistent rumors that significant changes may be coming to government-backed FHA (Federal Housing Administration) home loans.  Apparently, the following changes are currently under consideration by FHA:

 * Remove the per se blocking of sales on 'flipped' properties by offering a waiver to borrowers interested in pursuing flips in the marketplace, although there will be very specific circumstances under which the transaction will be allowed to occur under FHA guidelines.  A proposed waiver form has already been circulated.  

* Increase the minimum FHA down payment amount from 3.5% to 5%.

* Decrease the allowable amount of seller contributions (closing cost credits) from 6% to 3%.

* Require the FHA Upfront Mortgage Insurance (MIP) premium to be paid at closing by a buyer and no longer allow the MIP to be rolled into the loan amount.

Clearly these FHA changes could significantly impact homebuyers, especially first-time homebuyers most likely to explore the FHA loan option.  Stay tuned for updates.