FHA guideline changes coming soon

The Federal Housing Administration (FHA) recently announced a set of policy changes that will help strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities.

The up-front mortgage insurance premium (MIP) will be increased from 1.75% to 2.25%. This change will help the FHA build up capital reserves. Borrowers will still be allowed to finance the up-front MIP into their loan amount. This change will go into effect in the spring.

Allowable seller concessions will be reduced from 6% to 3%. By allowing 6% seller concessions, the FHA is exposed to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions. This change would go into effect in the early summer.