Last month, the government unveiled plans that could cut closing costs for many applicants for FHA loans. An undated announcement claimed, "FHA eliminates 12 costly and burdensome policies in sweeping rollback."
What Are The Changes?
The first change is regarding FHA appraisals. The U.S. Department of Housing and Urban Development (HUD), which is responsible for FHA loans, said that switching to technology-led appraisals would create "streamlined appraisal procedures, lower costs, and quicker turn times." Effective immediately, appraisers will have five fewer rules to observe.
Next, HUD plans to end to the mandatory requirement for FHA lenders to inspect homes in Presidentially-Declared Major Disaster Areas. Previously, lenders had to inspect all homes in a disaster area, regardless of whether the individual home had been damaged. From now on, the FHA will defer "to the Mortgagee’s [lender's] discretion." This could lead to fewer reinspection fees by FHA appraisers.
Meanwhile, FHA is removing its requirement that FHA-approved underwriters are full-time employees. This could allow lenders to cut staffing costs and remain nimble in an ever-changing lending environment. Cost savings may be passed on to homebuyers.
Another idea is likely to be more controversial. This reduces requirements for homes in designated flood zones. According to HUD, properties may be in a Special Flood Hazard Area if documentation shows that no part of the property structure or equipment is within the zone itself. This could bring more homes into FHA eligibility as well as open up more land for building.
How Does All This Affect Homebuyers?
HUD's goal is to reduce costs of mortgage processing and increase housing supply. Whether this affects rising housing and homebuying costs is unclear.
HUD claims the changes will "cut red tape, help reduce the cost of homeownership, and eliminate financial and regulatory burdens." If those are the results, they will be welcome updates for homebuyers.
