HUD Issues Final Changes….

As reported yesterday, HUD was looking to make changes in their guidelines and now it is official!!! Most of these changes are effective with case numbers issued on or after April 5, 2010. I believe you will agree with me that they are not bad changes and in the case of property flipping…they are actually pretty good!!! I am providing the changes along with some insight on impact:

1. Seller paid concessions will be reduced from 6% of sales price to 3% of sales price. This is the biggest change. Six percent seller contributions usually meant a buyer to have 3.5% down payment and seller contributions would normally cover all closing cost and prepaids. Impact- buyer might need to have more money at closing.

2. MIP (Mortgage Insurance Prem) is being raised from 1.75% to 2.25%. This is not as big of a deal as it seems. This amount is financed into the base loan amount 99% of the time. It will not affect buyer’s cash to close at all and will have minimal impact on raising their monthly payment. When I first got into the business in 1984 the Upfront MIP was 3.75%. Over the years it has gradually ticked down to 1.75%.2.25% is still one of lowest percentages in FHA Upfront MIP over the last 20 years. Please do not let your buyer get hung up on this change. This change allows lenders to finance with only 3.5% down payment. Impact-perception may be big but reality it is not.

3. Monthly MIP on Loan to Values of 95% or greater will rise from .50 to .55. Again, I don’t see this as a “biggie.” Impact– A loan amount of $200,000 will experience an increased monthly payment of about $8 per month.

4. 90 Day Flip Rule has been TEMPORARYLY lifted. This means investors buying homes do not have to wait 90 days to sell if buyer is obtaining FHA financing. This is great as it will expedite transactions! Just keep in mind this is temporary, so stay in tune with industry updates. Also, this change goes into effect FEBRUARY 1, 2010!!! Impact- fewer headaches and more closings. Additionally this should invite more investors into the market to buy, fix up and sell homes. Good move by HUD.

Overall, I really don’t see any earth shattering things here. Probably a good financial move by HUD and should keep this valuable financing tool available for a long time.

Rates moved down slightly today!!! It is a great time to buy a home!!!