Door May Be Shut on Buyers

FHA may shut the door on home buyers and make the loan less affordable for home buyers that want to use an FHA loan. The Federal Housing Commissioner announced on January 20, 2010, that FHA may decrease the amount of closing costs the seller can pay for the buyer. In addition the financed mortgage insurance that is financed into the loan amount will increase as well from 1.75% to 2.25% of the sales price.

Currently FHA allows the seller to contribute up to 6% of the sales price toward the buyer’s closing costs. FHA will propose that this be decreased to only 3% of the sale price. This means that on a $200,000 sales price, the buyer will only be able to receive a maximum of $6,000 instead of $12,000 toward the closing costs. In other words, the buyer will have to come to closing with an extra $6,000 on a purchase.
The decreased seller help is projected to take effect in June, but has to first go through a public comment period where individuals and businesses can state their opinions. This change along with the first time home buyer tax credit should give many buyers the incentive to make a decision to buy a home quickly before it become more expensive to buy. April 30th, 2010 is the date a buyer has to have signed a contract and they must close by June 30th, 2010.

FHA Mortgage

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