FHA Mortgage – Important Changes Now in Effect
Thanks to Marcia Stolle, Mortgage Banker with Paramount Mortgage, for this breakdown of the basic rules and changes that are now in effect for FHA mortgages.
The Federal Housing Authority (FHA) has made some changes for 2014, which took effect January 1. First and foremost, you will see a drop in the maximum allowable loan. In the St. Louis metro area, for example, the new max loan amount for a single-family home has been lowered to $271,050 from $281,250.
Across the country you will see maximum FHA loan amounts falling. Please see the breakdown of limits at the end of this newsletter and consult with your local Paramount Mortgage representative to find out exactly how these changes affect your particular area.
Other items of note regarding FHA have not changed; so as a refresher let’s look at FHA qualifications and rules:
- Borrower must put 3.5% down based on sales price. 100% of the buyer’s contribution can be in the form of a gift. There are no reserve requirements; however, reserves can help to build a stronger case for a “tight” loan.
- The seller can contribute 6% of the sales price towards closing cost, points and pre-paid items.
- There is an up-front mortgage insurance premium (UFMIP) of 1.75% for all loan terms and amounts added to the base loan amount.
Some underwriting items include:
- Income, such as a pay raise that will start before the first loan payment, may be counted towards qualifying.
- In most cases, underwriters do not have to count any debt with 10 or less payments remaining. This is typically for non-revolving accounts, such as car payments and student loans.
- A Chapter 7 bankruptcy will not disqualify a borrower if 2 full years have passed since the bankruptcy was discharged.
- A borrower could obtain financing during a Chapter 13 bankruptcy if at least 1 full year has passed since it was filed, all Chapter 13 payments have been made on time, and the court gives permission to the borrower to incur additional debt.
Getting fully pre-approved is always a great idea. Now more than ever with the new laws taking effect in 2014, you should contact Marcia Stolle at PMC and obtain a pre-approval. Marcia is always available to help. Her help is free of charge, our experience is priceless! Her direct line is 314-372-4318; website for Marcia Stolle
Here’s to a great 2014!
