HUD (Housing and Urban Development) has announced significant new lending guidelines that could take money right out of your pocket. David Stevens, the Commissioner for the FHA (Federal Housing Administration) made the announcement for the changes today.  These changes are supposed to start taking effect during spring and into summer. The Homebuyer Tax Credit is set to expire on April 30, 2010.  However, if you have a binding agreement by that date, you have 60 days (June 30, 2010) to close on the home and still get the credit.

The changes were made in an effort to strengthen capital reserves and manage risk while continuing to support the nation’s housing market recovery.  In a nutshell, here are the changes that have been proposed:

1. Increase the Mortgage Insurance Premium (MIP)
2. Update the combination of FICO scores and downpayments for new borrowers
3. Reduce seller concessions
4. Measures to increase Lender enforcement

Let’s take a REALLY close look at number 3.  Currently, FHA allows the seller contributions to max out at 6% of the loan amount. FHA limits in Atlanta are $346,250 for the total loan amount.  However, FHA new guidelines will reduce seller contributions to 3% of the loan amount.  That reduction just cost you $10,387 if you are at the maximum loan limit.  On a $200,000 home, you just lost $6,000.  I don’t think I need to go on with my calculations.  We are talking about a major change here.

If you also qualify for the Homebuyer Tax Credit (first time or move up), you have between $6,500 and $8,000 that you can add to the current 6% in seller concessions.  That’s a lot of money for those buyers that qualify.  You could take your tax credit and put it in a savings account to help pay your mortgage or to use as a “rainy day fund”.

The other changes being made by HUD are not nearly as impactful to the buyers as item number 3.  If you qualify for the first time homebuyer’s credit and you wait until June or after to buy a home, you are potentially kissing $18,387 good-bye.  That’s a lot of money.

Now, I’m not trying to scare anyone into buying.  What I’m saying is that if you are qualified and you have been thinking of buying a home, there is no better time to buy.  Prices are still low; interest rates are low and FHA allows 6% in seller contributions.  In addition, FHA loans are assumable.  That means you could sell your home 5 years from now and if the buyer qualifies, they could assume your FHA loan AND it’s low interest rate!  What a great selling point particularly if interest rates are significantly higher in 3-5 years.  Most economists are predicting a rise in interest rates over the next couple of years.

If you wish to learn more about FHA, please go to www.FHA.gov. (insert link)  If you are interested in buying a home, please feel free to contact me at TAnderson@remax.net or 770-826-5907.