Looking to FHA for your next mortgage? Get a move on!  Although you have until Friday, April 2, 2010 to get your application in, Friday is Good Friday and most banks will be closed.

Your true FHA deadline is Thursday, April 1.

Guidelines Change In 3 Days

To shore up its balance sheet and dwindling capital reserves, the Federal Housing Authority is rolling out sweeping financial changes. Starting next week, FHA borrowers must to look better on paper and to be better credit risks.

Mortgage insurance premiums are rising, too.

In its official announcement, the FHA said its trying to better position itself to "manage its risk while continuing to support the nation’s housing market".

The changes start with case numbers assigned on or after Monday, April 5, 2010.

Reviewing The FHA Mortgage Changes

One widely speculated change wasn't made -- the increase of the FHA minimum downpayment.  Homebuyers in Cincinnati, Chicago and elsewhere can still buy with just 3.5 percent down.  However, the group did roll out a number of other changes, including:

• An increase in Upfront MIP from 1.75 percent to 2.25 percent
• A plan to reduce maximum seller contributions from 6 to 3 percent by summer
• A Congressional request to increase monthly mortgage insurance premiums

Furthermore, the FHA's new guidelines institute a minimum FICO requirement of 580 to make the minimum 3.5% downpayment, requiring 10 percent for any applicant whose credit score falls below that level.

2010: The Year Of Investor Overlays

But, just because the FHA allows 580 FICOs, banks don't have to allow it.

The official term here is "investor overlay". It's when that banks use Federal Housing Authority guidelines as a starting point for their own set of underwriting rules which are often more strict.

And banks have a good reason for making investor overlays.

In January, the FHA subpoenaed 15 lenders -- including the well-respected 1st Advantage Mortgage in Lombard, Illinois -- because of abnormally-high FHA default rates.  The act was a shot across the bow, it appears, because more lenders have been shut down since.

The FHA made a loan performance benchmark and if a  bank's defaults exceed the mean by x number of sigmas, said bank loses its FHA license. Period.

Expect FHA investor overlays to be a running theme of 2010.

Your FHA Mortgage Denial May Be Reversible

Starting immediately, FHA mortgage guidelines will vary from bank-to-bank as lenders get more active about their originated mortgages.  Going forward, what gets FHA-approved Bank of America, for example, may not be FHA-approved at Wells Fargo.

FHA loans will now be denied simply because the applicant applied at the "wrong bank".

If your mortgage has been denied or you just want to have the best chance of being approved possible, call or with some notes on your situation. I work for Waterstone Mortgage -- a HUD-approved lender.  We underwrite and fund FHA mortgages from our own accounts, and work with the nation's largest investors as an approved conduit.

In other words, apply once and I'll automatically align with the best pricing and fewest overlays. to email me about getting started.

I gave a television interview with Beejal Patel of First Business this week and we covered a lot of ground topics like housing, mortgage rates, and the FHA.

In this 5-minute spot, I answer:

• What will happen to mortgage rates after the Fed's market withdrawal?
• How will rising mortgage rates impact the housing market?
• What will happen to home prices after the tax credit expires?
• How does the jobs report relate to mortgage rates?
• What changes are coming down the pipe from the FHA?
• What are investor overlays and why do they matter to home buyers?

Like I said, we cover a lot of ground.  Thankfully, it's easy to digest.

If after watching the piece, you have some follow-up questions for me, and I'll reply back to you.