FHA plans to require borrowers to produce more cash for down payments

WHAT DOES THIS MEAN FOR YOU?
Simply...you will be required to increase the amount of up-front cash when using FHA loans. Up-front insurance premiums are increasing from 1.75% to 2.25% to be collected at the settlement table.

NEXT QUESTION: WHY IS THIS HAPPENING?
There are a couple of reasons why FHA is requiring the increase. First reason, is that the FHA is financially strapped with FHA currently backing 30% of all loans and 20% of refinanced loans. Second reason is the belief that buyers will be more responsible regarding their financial well-being in the home if they have more invested.

WHAT ELSE IS IMPORTANT IN THE UPCOMING FHA POLICY CHANGES?
FHA is reducing the amount that sellers are able to contribute to the buyer's closing costs and free upgrades. The new policy will reduce from 6% to 3% of the salesprice toward closing subsidy.

A MUST READ: Why are interest rising to 6% at the beginning of 2010?

"We're ending the year with mortgage interest rates practically even with their levels at the close of 2008. Mortgage finance giant Freddie Mac reported Thursday that average rates on 30-year fixed-rate loans hit 5.14 percent with 0.7 points this week.

That's up from last week's average of 5.05 percent and marked the fourth consecutive increase since rates bottomed out at a historic low (at least since Freddie started keeping track in 1971) of 4.71 percent in early December.

Rates also rose this week for 15-year mortgages, reaching an average of 4.54 percent with 0.7 points. Last week the rate was 4.45 percent.

But the rate fell slightly on 1-year adjustable-rate loans, which averaged 4.33 percent compared with 4.38 percent last week.

Mortgage rates were driven artificially low in 2009 by the Federal Reserve, which said it would buy as much as $1.25 trillion in mortgage-backed securities to stimulate the economy. That stimulus program is scheduled to end during the first quarter of the new year." (Washington Post)

READ MORE OF THE ARTICLE:
http://voices.washingtonpost.com/local-address/2009/12/30-year_mortgage_rates_rise_to.html

Call me at 301-452-4767 with any real estate questions!