RateAPY

Proposed Changes to FHA Loans

Posted by: RateAPY Bank Rates News
January 25th, 2010

In the past three years, the volume of loans guaranteed by the FHA has soared. FHA loans now make up over half of all mortgage loan originations. This jump in volume has caused the FHA to re-evaluate its current model. Following are some changes that have been proposed:

• The up-front mortgage insurance premium (UFMIP) on FHA loans will be increased from 1.75% to 2.25% in order to build up capital reserves. Some of this may be shifted over to what consumers pay monthly if Congress allows.
• Borrowers who have less than a 580 credit score will have to put a minimum of 10% as a down payment. Currently, the down payment required is 3.5%.
• The seller of the property will only be allowed to contribute 3% to help the buyer, down from 6%.
• Enforcement of FHA rules will be increased, which may affect mortgage lenders.

These changes may make the FHA financially more secure, but they may also make FHA loans more expensive. Talk to an FHA mortgage lender today.