HUD is revisiting their idea, from 2010, of reducing the allowable closing cost concessions for FHA loans. HUD Document Here Currently, the cap is 6% which generally covers all costs associated with a home purchase minus the down payment which must be paid for by the buyer or gifted from a family member or employer. HUD’s new strategy is to drop that cap to 3% or $6,000, whichever is greater.
Why should you care?
Typical closing costs, in Reno and Sparks, for a home under $200,000 being purchased with an FHA loan can run between 3-4% but generally end up around 3.5%. As part of negotiations, a buyer can get the seller to pay for these as a concession or credit at the closing table. At $200,000, closing costs of 3.5% equal to $7,000. This cap would mean a $200,000 FHA home buyer would need to bring their down payment of $7,000 plus an additional $1,000 for the closing costs that weren’t paid for.
This new cap will push many home buyer’s out of the market who could easily manage the monthly payments but don’t have enough in savings to cover all their closing costs and down payment. Less buyers in the market leads to more homes sitting on the market (many vacant) and increased depreciation. This not only hurts home buyers but home owners who are desperately seeking a stabilization of home values.
Want to help?
Let HUD know that you want this market to turn around and believe home value stabilization in integral to our overall recovery as a country by contacting HUD through the following link. Keep Concessions at 6%. Commenting ends on March 26th so please act quickly.
For more information on FHA closing costs or purchasing a home in Reno or Sparks contact me at (775) 750-1437 or Ricky@Resnv.com.