One of the most important tools allowing buyers to take housing inventory off the market is easily accessible money, low cost, low down payment loans. Now it appears that concerns about FHA reserves may derail a lot of plans to purchase by increasing the minimum amount required as a down payment, the mortgage insurance premiums, minimizing the seller paid contributions and possibly increasing credit score minimums.
Each of these steps that are being considered by HUD Secretary Shaun Donavan would “increase the skin in the game” and theoretically lead to less risk in the loans insured by FHA. The difficulty to any potential borrowers is that the money coming out of their pocket at closing and during the life of the loan will be greater, thereby reducing their buying power.
The initial implications are obvious; if you are planning to buy a home in the next few months, don’t wait or risk an increase in your overall costs. On the other hand this may lead to another temporary setback in housing marketability, so if you are a seller, make sure your house is priced right to draw a quick sale.
Some articles that explain what is going on:
CNN asks Should FHA home loans be more expensive?
Bloomberg claims FHA to Require Homebuyers to Put Up More Cash
From the LA Times Home buyers will have to lay out more cash for an FHA mortgage
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