There are many great reasons to buy a home in Key West! Beautiful surroundings, ocean views, and the island life are just a few that come to mind. The home buyer’s tax credit ($8,000 for first time buyers or $6,500 for repeat buyers) is another reason why now is a great time to buy or sell your home. But there are more changes on the horizon as the FHA announces its new lending guidelines.

January 20th, the FHA made an announcement outlining their new lending quidelines. These changes may make it harder for some to realize their American dream of homeownership. For years, FHA has helped countless people who had less money for a down payment or had a credit score that was lower than what the banks liked. There are many homeowners who would still be renters if it weren’t for FHA loans.

Always a popular program, in the last few years FHA has written almost 30% of mortgage loans. As the number of loans they held increased, they began to feel the impact of rising delinquencies. The new rules are an attempt to reduce the number of defaults. While some of the rules will apply to lenders, there are some big changes for buyers as well.

So what is the FHA’s new plan? Basically to lessen defaults on FHA loans, guidelines are being tightened. While there is not a specific date set for the buyer guidelines to go into effect, they will definitely impact who can buy a home. Here are the basics of the changes:

• Lower FICO scores (below 580) will now require a 10% down payment…that is up from 3.5%
• Mortgage Insurance Payment (MIP) is being raised from 1.75% to 2.25%.
• The allowable seller’s concession has been slashed from 6% to 3%. This means sellers will contribute less to the buyers closing costs.

All three changes are expected to go into effective by late spring-early summer except for the MIP increase which starts April 5, 2010. So if you have been trying to decide if it is time for you to buy or not, it is! You can still take advantage of home buyer tax credit, low interest rates and the current FHA loan guidelines to make the dream of owning a home come true.

If you are ready to embrace the island life and relocate to beautiful Key West, call Margarita Villoch! Her team will be glad to answer any questions you have about the changes coming for first time home buyers! If you are wanting to sell your home, we can help with a free market analysis of your home!