House Closing Costs Increase

January 20, 2010 — today the FHA announced policy changes on FHA Mortgages.  The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement.

FHA Mortgage Policy Changes:

1. An increase in the Mortgage Insurance Premium (MIP) from 1.75% to 2.25%.  On a $200,000 loan, that would cost you an extra $1,000 in house closing costs.  This policy change goes into effect in the spring.
2. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will see an increase in their house closing costs as they will be required to put down at least 10%.  This policy change goes into effect in the early summer.
3. Seller concessions reduced from 6% to 3%.  A seller concession is when the seller pays all, or a portion of, your house closing costs.  A 3% reduction doubles the amount of house closing costs that have to come out of the buyer’s pocket; which is especially hard for first time home buyers.  This policy change goes into effect in the early summer.
4. Increase enforcement on FHA lenders