FHA just announced that there will likely be some changes to their requirements for insuring loans in the future. The main ones include an increase in the upfront mortgage insurance premium (UFMIP) and a decrease in seller concessions from 6% to 3%.

For those who don’t know what UFMIP is, it is the “downpayment” that a buyer makes on the mortgage insurance when they use an FHA insured loan. Conventional loans have mortgage insurance (MI) for any loan that is greater than 80% of the value of the property being used as collateral. The MI had become somewhat expensive for borrowers with sub-700 credit scores, causing some borrowers to take out 80-20 loans in the past to avoid it. Because of the losses to lenders over the past couple years, there are very few new loans written like this.

FHA charges a premium up front of 1.75% of the loan amount which can be financed into the loan itself and then a monthly charge of 0.55% each month for  5 years or until the loan-to-value automatically reaches 78%, whichever comes last. This premium is set to increase to 2.25%. On a $150,000 loan, the amount borrowed will increase by approximately $750.