ATTENTION FIRST-TIME BUYERS: FHA FINANCING GETS MORE EXPENSIVE APRIL 5

Just a reminder to those of you looking to buy a first home and capture the $8,000 government tax credit - you need to find a home and lock in a mortgage rate by April 5, not April 30, or you are going to be impactedly negatively by FHA's new mortgage guidelines.

To review, FHA (government-insured) mortgage financing has grown dramatically over the past four years as traditional lenders have scaled back or disappeared from the market altogether. FHA now accounts for over 40% of all new mortgage loans, whereas just a few short years ago FHA made up less than 5% of the market.

What does this mean? It means that FHA (and HUD, which oversees it) is taking on a huge amount of risk by being the dominant source for mortgages during a time when values are falling in many parts of the country. To offset this risk, FHA has been tightening guidelines and raising fees. Last year, for example, FHA raised its down payment requirement from 3% to 3.5%, and in Congress there is growing support for eventually raising the down payment requirement to 5%.

But back to today. Effective April 5, FHA will be raising its "upfront" MIP (mortgage insurance premium) from 1.75% to 2.25% of a buyer's base loan amount. On a $200,000 FHA loan, this is an additional $1,000 that will be added to the buyer's mortgage.

In addition, FHA will be raising the annual MMI (monthly mortgage insurance) premium from .50% to .55%, which will cause a small jump in the monthly payment, and reducing the amount a seller can contribute to an FHA's buyers closing costs from 6% to 3%. On lower priced homes, that 3% cap is going to mean that buyers will have to come up with money for more of their own closing costs on an "out of pocket" basis.

There will also be new credit score requirements that could negatively impact lesser-qualified buyers.

None of these changes are necessarily crippling, but they do add up. And if you're out looking at homes now, realize that you only have a very short time to take action before these new changes take effect.