There are so many changes going on in the mortgage industry that it is no wonder we all seem a little confused, including underwriters.
FHA just recently relaxed the limits on origination fees and waived the 90 day property flipping rule for a period of one year. You can view the new property flipping guidelines here. Updates
What concerns me the most are the changes David Stevens, FHA Commissioner, is thinking about for the future.
- Raising the minimum down payment,
- establishing a minimum credit score,
- increasing the cost of mortgage insurance, and
- decreasing the amount the seller can kick in.
Read this article put out by the Wall Street Journal.
FHA Future Changes
I have some very real concerns about these changes. The average American, even with a job and good credit, doesn't have that kind of money set aside for a down payment and closing costs.
That only leaves them with two options: a VA mortgage, or a USDA Rural Development mortgage.
A VA Loan has always been a great 100% LTV loan for our veterans. Even though it does not require a down payment, the other guidelines are pretty strict. I'm sure the foreclosure rate is very low. I hope they don't start changing this program because our veterans have earned this exception.
The USDA Rural Development loans are also 100% LTV. They have a Guarantee program that is similar to a VA "Guaranteed" loan and they have a Direct Mortgage program with payments that can be subsidized by the Government. Both of these great programs are available but the property must be located in a rural area. There is more information here: Rural Development Guidelines
So, soon the average American will only have two options, unless they are a Veteran, and those are: buy a home in a rural area, or Rent!