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Recent FHA Changes and How They Affect Buyers

Buying a house in Maine is often a combination of a lot of fun and a lot of stress. With that in mind, how you’re planning to pay for the home can affect how stressful it is to make your purchase. If you intend to finance your purchase and use FHA as your lender, there have been some recent changes you’ll want to consider. They can affect you as a buyer, so you need to make sure you understand what they are. One of the changes has to do with mortgage premiums, which have been recently lowered. That’s good news for buyers everywhere, as it will save them some money.

Since 2008 FHA and other lenders were avoiding lending money as much as possible, because too many people were defaulting on their mortgage loans. As such, FHA didn’t want to lend money, since there was a concern that even more buyers would avoid paying and would move toward bankruptcy, foreclosure, and default. However, the strict requirements FHA was using meant that buyers who really did have good creditworthiness were also having trouble getting qualified. These buyers ended up not being able to close their loans, but they were not serious credit risks.

Lending standards are being clarified by FHA, as well, and red tape is being cut. That will help lower the mortgage costs for hundreds of thousands of people. In turn, more people will be able to buy, and that will start to help the real estate market recover. Home prices may begin to rise, also, and sellers will be able to get more for their properties. By doing that, there will be fewer short sales and foreclosures. While the FHA did not have to make any changes, there were many interest groups, associations, and members of Congress that wanted to see FHA lower the premiums it was charging for its mortgage insurance.

Thousands of buyers were sidelined and couldn’t afford to close on their homes, because the mortgage insurance premiums made their payments too high for them to qualify for the loan. The change from 1.35% to 0.85% will allow a number of buyers to qualify, because the lower payments will fall within the debt to income ratio required for qualification through FHA. Buyers will also save hundreds or even thousands of dollars per year on their mortgages. Optimism surrounds the changes, and both buyers and sellers are pleased to see the lowered mortgage premiums.

First-time buyers may be the ones who see the biggest benefits from the recent FHA changes, since FHA is a popular lender for those who don’t have large down payments. With a requirement of only 3.5% of the home’s purchase price that has to be put down, younger buyers are able to come up with the money to get into a home. Their payments will be lower, now that the mortgage insurance premiums have been reduced, so that creates a much better opportunity for buyers without a lot of cash to get into a great Maine home.