The Start of FHA 2010 Changes for Investors
~ 90 Day Seller Acquisition Rule Change ~
The following is an explanation of the changes that are taking place in the FHA mortgage world. My good friend Nick Parino with New American Mortgage helped with the following explanations that should help answer your questions.
For one year until 2/1/2011, FHA is removing the 90-day seller acquisition requirement on properties. This move is to keep FHA buyers' purchase offers from being denied due to the seller's brief period of ownership. It may also help the sellers from the expense of holding the property and potential vandalism associated with allowing the property to sit vacant for 90 days.
This takes effect 2-1-10 for the next year. Lenders will be required to ensure that the property is not part of a ‘flipping' scheme which sales the property at inflated price to unsuspecting borrowers. If the property has had change of ownership within 90 days of the FHA borrower's purchase, the transaction must meet the following requirements.
1. Transactions must be arms-length, with no identity of interest between the borrower, seller, or other party in the transaction.
2. When sales price of the property is 20% more than the seller's acquisition costs, the lender must:
a. Provide supporting documentation
b. Order an inspection and provide it to buyer
3. This 90 day exception is limited to forward mortgages, and does not apply to Home Equity Conversion Mortgage purchase program.
Up-Front Mortgage Insurance Premium (UFMIP) Increase
As expected, HUD will increase the cost of their UFMIP on purchase and all refinance transactions from 1.75% to 2.25% effective on case numbers order as of 4-5-2010 per Mortgagee Letter 2010-2. Some of the UFMIP increase to the annual MIP will shift to the annual MIP which is paid monthly over the life of the loan. This increase will allow HUD to increase their capital reserves requirements to support the loans they have insured.
This change will increase the payment on a $200,000 loan about $6 per month.
FICO Requirement Changes
FHA is requiring the borrower to have a FICO score of 580 to allow the 3.5% down payment requirement. If they have less than a 580 FICO, the borrower is required to have 10% down payment from their own funds. This may not be a big issue in our industry, as most lenders were not allowing a FICO less than 620
Reduction for Allowable Seller Concessions
To reduce the level of exposure to FHA with sellers inflating sales price to accommodate high seller concessions, the 6% seller concessions has been reduced to 3%. This is scheduled to go into effect this summer.
If you are looking for an investment property here in Northern Nevada, now is a good time to start your home search. I can help you find a home or several homes that meet your criteria. If you are looking for a lender in the Reno and Sparks Nevada areas, Nick Parino with New American Mortgageis someone with a lot of experience that can help you decide if investing is right for you.
The Start of FHA Changes for Investors ~ Northern Nevada Real Estate Talk