The FHA (Federal Housing Administration) has made some changes to it’s home financing requirements that may have an impact upon home 
sales and purchases. The changes involve credit scores, mortgage insurance and seller contributions.
Previously, the FHA did not have a minimum credit score requirement. The new guidelines require a minimum credit score of 580. Credit score is determined by averaging the scores of the three major credit reporting agencies. Home buyers who do not meet the minimum will be required to make a 10% down payment rather than the 3.5% required.
The FHA has raised the upfront mortgage insurance premium from 1.75% to 2.25%. Annual premiums have remained unchanged.
Reduced the amount of seller contributions to 3% from 6%. Seller contributions are where the seller agrees to contribute toward the buyer’s actual closing costs, prepaid expenses, discount points, and other financing concessions.
So what does this mean, will it hurt sales in the Athens, Ga real estate market, which includes Athens-Clarke County, Watkinsville, and the adjacent counties, Madison, Jackson, Oglethorpe, Oconee and parts of Barrow & Walton? It is possible but the impact should not be too bad. Most lenders are already requiring a minimum credit score, often at 600 or higher. It will, however, require that the buyer have more money available at closing.
How much money will be required? Consider the case of a buyer purchasing a home at the average price, for the Athens, Ga area, of roughly $180,000.00.
Under the old guidelines, the buyer would require: Under the new guidelines the buyer would require
1.75% mortgage insurance premium $3150 2.25% mortgage insurance premium $4050
This would require an additional $900 in upfront mortgage insurance fees.
Additionally, the seller may have contributed up to 6% of the purchase price, or $10,800 to defray some of the financing costs. That amount is now reduced to 3%, or $5400. This means that the buyer may now have to come up with and additional $5400 that might have been covered by seller contributions. Therefore, on the average price home in the Athens, Ga area, the buyer may need to come up with anywhere from $900 to $6300 additional dollars at the time of purchase.
Some buyers may have a difficult time coming up with the additional funding. However, the FHA is looking for congressional approval to move some or all of the mortgage insurance increase into the annual premium to mitigate the requirement for the buyer to come up with additional money at closing.
Not all of these changes will take place at the same time. The increase in the mortgage premium will take place on FHA loans having a case number assigned on or after Apr. 5, 2010. The other changes will take place sometime in the summer, date to be determined.
So what does this mean? Basically, it means that buyers will need to come up with additional funds to bring to the closing table. Prospective buyers, planning on purchasing, need to start working now to make sure that you have that additional cash available.
Or, you can use one of several of other options:
- You can move your home purchase forward, making sure that, if using an FHA loan, you get a case number assigned, Apr. 4, 2010 or earlier.
- You can use a VA loan, if you qualify, which requires no money down and does not have mortgage insurance.
- You can use a USDA Rural Development loan in areas that qualify. Those areas include Jackson & Oglethorpe Counties as well as parts of Oconee, Walton, Madison and Barrow counties.
- You can get a conventional loan.
If you are interested in more information about this, or, are considering buying or selling real estate in the Athens, Ga area, including the surrounding communities and counties, please call me at 706-207-5290. For a copy of my 99 Tips for Getting Your Home Ready to Sell, please click here to email me with the request. To search for homes in Athens, Ga. area, as well as NE. Georgia, please visit my website, The Athens Real Estate Page.
