Although FHA loans aren’t that common in Carmel and Pebble Beach, they are playing a role in other lower priced areas such as Seaside, Marina, and Salinas. Having said that, two of my recent transactions in Carmel-by-the-Sea have included FHA loans because the “cost of money” under the FHA loan was such that the buyer’s opted for the loan even though they could have paid cash.

While the exact changes that will be coming are still being debated, it is likely that the minimum down payment for FHA loans will increase, the minimum FICO scores for new borrowers will go up, and probably the maximum seller concessions will be reduced from 6 percent to 3 percent.

The minimum FICO score for FHA backed loans was raised from 500 to 580 earlier this year although most lenders actually set their minimums at higher levels usually around 620.

FHA’s move to tighten requirements is partly in response to the continued tightening of guidelines by Fannie Mae and Freddie Mac. Fannie Maie will implement a minimum 620 FICO score along with other tightening requirements next week.

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