Home Buyers ... NEW Rules From FHA Are Headed Your Way

Most first-time home buyers choose FHA financing because of the lower down payment requirement and less than perfect credit history that makes it easier for them to qualify these days. But make no mistake, as conventional underwriting guidelines continue to get tougher we have seen FHA raise the bar too. Most lenders have adopted a minimum qualifying FICO score of 620 and if your FICO is 660 or below, your interest rate will cost more. HUD recently announced FHA changes coming January 1, 2010, that home buyers need to know about.

FHA Appraisal Period - Currently an appraisal report is effective for a period of six months on existing homes and up to 12 months for those under construction. Come January 1, the time period is reduced to four months for all homes.

FHA Appraisal Transfer - New guidelines will allow a second appraisal to be ordered under certain circumstances when a borrower switches from one lender to another and restates the requirement that the first lender must transfer the appraisal to the second lender at the request of the borrower.

FHA Appraiser Certification - HUD is requiring appraisers to be State certified. In California, the two “certified” designations are AR which is the Certified Residential and the AG which is the Certified General designation. Appraisers already have to be licensed and certified in California so this becomes an additional certification.

FHA Appraiser Independence - A mortgage professional and their staff will be prohibited from ordering an appraisal. The lender will be responsible for making sure the appraisal process is independent. It sounds like HVCC appraisal rules governing conforming loans will be coming to FHA loans. Lenders have not announced how they plan to implement this new guideline so it will be interesting to see what form it takes.

Remember that lenders use HUD guidelines as a base and often add additional layers of qualifying that borrowers must meet. That’s why rules vary from one lender to another and a mortgage broker can pick and choose the best lender to meet your needs. If you have questions about FHA financing, contact me for answers.