More FHA Loans Will Require Two Appraisals in The New Year
January 5th, 2009
Related FHA Stories
- HUD Tightens Appraisal Standards
- Appraising the FHA — and the Mortgage Marketplace
- FHA Mortgage Appraisals Become Portable
- New Private Appraisal Rules Follow FHA Standards
- FHA Mortgages & Inflated Appraisals
As the New Year has finally begun, I wanted to point out two key changes FHA borrowers can expect to see in this coming year. The first issue has been the change to the FHA down payment requirement; a change that we’ve heavily covered and seen some borrowers face since late last year. But in cased you missed it, as of January 1st 2009 FHA purchase loans will now require a down payment of at least 3.5 percent.
The other changes have been a few key updates to the FHA appraisal requirements which also began on January 1st 2009. One thing new for 2009 is that more FHA loans will now require two appraisals to be eligible for FHA.
Appraisal Changes for the FHA
– A few weeks ago, we covered the recent update from HUD requiring FHA approved to use state certified appraisers for their FHA mortgages. If you missed the story, you can view our previous post here. Essentially, by limiting themselves to state certified appraisers, HUD limits its exposure to possibly exaggerated or over inflated appraisals.
FHA Second Appraisal Requirements
In December of 2008, HUD announced a change in requirements for second appraisals that would take effect January 1st of 2009. In the letter supplied by HUD, a second appraisal will now be required for all cash out refinances where LTV exceeds 85 percent of the appraised value. Before, a second appraisal was only required if the home was located in a declining market, the loan was above $417,000, and exceeded a 95 percent loan to value ratio. If you still meet these three requirements, you’ll still need that second appraisal as well.
The costs of two appraisals may be an issue for borrowers, but the key issue is that the FHA is taking steps to limit its exposure to risky loans. In comparison to conventional mortgages, FHA loans still remain competitive as it often results in fewer pricing hits during a cash out transaction–meaning lower monthly mortgage payments for borrowers.
And although some of these changes might seem more like obstacles to FHA borrowers, the New Year has presented some welcomed changes to many individuals. Most notably, first time homebuyers and investors have found that the combination of lower mortgage rates and discount homes have made it a prime time to buy. And since FHA “increased” its maximum loan limits to $625,500 permanently in certain areas, many are still finding ways to take advantage in this current housing market.
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