FHA changes likely to impact first time and median income buyers

FHA loans have been a significant part of home sales over the past couple of years after 100% loans went away. While these low down payment loans have no doubt help stabilize the housing market, the burden on the FHA has grown relative to their presence in the market.

This week, the clamps began to tighten down. While some are concerned that this will cause home sales to drop off again, it nonetheless is probably a good thing for the longer term return to normalcy. Changes for buyers include:

• Increased mortgage insurance from 1.5% of loan amount to 2.25%
• Increased down payment requirements based on credit score
  
• Reducing the amount a seller can pay towards a buyer's closing cost from 6% to 3%

The timing of these changes varies, but some will be implemented very quickly. To see the full list of changes and timelines, view the HUD announcement