FHA ( Federal Housing Administration) announced several changes that could make it harder for some first time Minnesota home buyers to get a loan.According to an article at www.cnnmoney.com, about half of all first time Minnesota home buyers in 2009 used FHA to acquire their loan. FHA has softer lending requirements than traditional lenders in that they require 3.5% down payment and allow lower credit scores. From the look of things, first time Minnesota home buyers with a credit score of 580 or less, will now need a 10% down payment and will pay a higher mortgage insurance premium.
The new requirements will also reduce the amount of money that a Minnesota home seller can contribute to the buyers closing costs from 6% to 3%. Typically a buyer requests a seller to pay their closing costs which is rolled into the loan by increasing the sales price. This change will take pressure off appraisers to inflate the Minnesota real estate prices.
My take on the FHA changes is that Minnesota home buyers won’t feel a dramatic affect. People with lower than 580 credit scores will feel the major impact since the average borrowers credit score is 693. It will definitely impact some first time Minnesota home buyers, but I don’t see it impacting the housing market in general.
Remember, the federal tax credit is set to expire on April 30th! That means a purchase agreement must be written by the, and close by June 30th.
From what I have seen so far in this spring market, Minnesota home buyers have been rather slow to act. Some parts of the market are moving, but others are surprisingly quiet. For example, I have a townhouse in Eden Prairie that should be prime for first time home buyers priced at $129,900 that has had very little traffic. Yet in the same time frame I have been in multiple offers on an Eden Prairie home priced at $450,000. It’s a strange Minnesota home buyer market!
