Updated FHA Borrower Alert: Higher FHA Costs Effective April 5

Below is a bulleted list of new FHA guidelines we discussed earlier this week, and here’s the official HUD announcement. The FHA credit score changes don’t have a huge impact on most borrowers because the average FHA credit score is now 681 and median credit score in the U.S. is 720. These changes will take effect for anyone beginning a purchase or refinance loan transaction on April 5 or later. The increase in mortgage insurance premiums will require that anyone looking at quotes in the coming months will have to be aware that those quotes will need to be revised higher as of April, so it’s good to plan for those fees now with your lenders.

• Down payment for FHA borrowers with credit below 580 is now 10%.

• Higher-credit borrowers can still do as little as 3.5% down.

• The up-front FHA mortgage insurance premium is going from 1.75% to 2.25%. This can still be financed by borrowers who choose to do so.

• HUD is seeking congressional approval to allow it to raise annual mortgage insurance premiums (paid monthly by borrower) above the 0.55 percent maximum.

• FHA allowable seller credits for closing costs is being reduced from 6% to 3%.