Looks like change is underway for FHA loans as the Federal Housing Administration prepares to raise fees this Spring.  It doesn’t look like an exact date is in place at this time.

Currently, the upfront mortgage insurance premium is at 1.75% & will rise to 2.25%.  This fee can be rolled into the loan amount.

Borrowers with a credit score of less than 580 will be required to come in with a 10% down payment.  The 3.5% minimum down payment will still be an option for borrowers with a score of at least 580.

Seller credits to buyers (typically applied in escrow for buyer closing costs) will be reduced from 6% of the purchase price to 3%.

The other main finance option for buyers is to have 20% down and go for conventional financing which does not require mortgage insurance.  In our very pricey San Francisco real estate market, this is a substantial chunk of change especially for first time buyers.

For most of my buyers (lately first time buyers), FHA loans have been their best option to get into the S.F. Bay Area market.  In spite of the reports of high unemployment, there are still buyers who have been diligently saving and now have this window of opportunity to jump in due to low interest rates, less buyer competition, job security and some price softening.  This is what I’m seeing with my buyer clients.

I always have the conversation with my buyers that if there is any chance of job instability that they not make a purchase; I certainly don’t want to reconnect with them because they have a major financial change and can’t afford to keep their home.

It would be great to know the location/city/state of the 1 in 6 FHA homeowners who are behind on payments (referenced in SF Gate).  Yet again, it is the common broad brush stroke approach in the reporting of the news…..

Full details from SF Chronicle