4 FHA Rule Changes Affecting Wilmington Home Buyers in 2013
If you are a first-time home buyer, you may already be leaning towards an FHA-backed mortgage to finance your Wilmington or Newark home. Recently, the Federal Housing Administration announced changes to their mortgage guidelines, which are being made to stem the losses from sour loans.
In case you are not familiar with it, the FHA is a government entity that insures mortgage loans made by banks and other front-line lenders.
Without the FHA, home buying would be tough for buyers who cannot meet high down payment and credit score requirements. After the collapse of subprime lending and the tightening of credit, FHA-backed mortgages became the only game in town for many first-time home buyers.
FHA guidelines are also more forgiving when it comes to credit history, making it the only practical option for home buyers who had a prior bankruptcy, foreclosure, or short sale in the past few years. For these reasons it's a good idea to understand the FHA role in our housing market!
Here are the 4 FHA rule changes slated for 2013, and how they may affect you:
1. FHA loans require the borrowers to pay for mortgage insurance. This insurance protects the lender in the event you default on the loan. It used to be that you could get the monthly mortgage insurance premium waived after you achieved a certain amount of equity. This is no longer the case; effective in 2013, the mortgage premium will be on your mortgage payments for the life of the loan.
2. The cost of monthly mortgage premiums will go up by .10 basis points. This is a relatively small amount; it would add an extra $20 a month to a $200,000 mortgage. Keep in mind that this is only the increase effective in 2013, and not the entire premium.
3. For large mortgages, the FHA will require higher down payments beginning in 2013. The minimum down payment for a $625,500 mortgage will be 5%. This is an increase from the prior minimum of 3.5%.
4. Those who have credit scores in the 580-620 range will face stricter debt-to-income ratios in 2013. In other words, the less debt you have, the better.
The good news is, these changes shouldn't derail anyone's plans to buy a Delaware home. Even with the new changes in 2013, FHA-backed mortgages remain attractive.
Need more information about buying a Wilmington or Newark home? As your experienced real estate professional I'm here to help you! I can also refer you to FREE home buying seminars and help you find the best home for the right price.
Contact me for neighborhood price trends, recent sales, and expert guidance in our fast-changing real estate market.
Katina Geralis
Wilmington, DE Real Estate Expert
Keller Williams Realty
Wilmington Real Estate
Wilmington Homes for Sale
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One year ago, the State of Delaware had one of the highest foreclosure rates in the nation. This prompted our State lawmakers to create the Automatic Residential Foreclosure Mediation Program, which became effective as of January 19, 2012.
