While 3.5% down is still available to home buyers who use FHA financing, the  Federal Housing Administration has announced changes to the popular home buying program.  The changes are being implemented to increase the FHA’s income and reduce the agency’s risk on these loans.   There was talk before this week’s announcement that the minimum down payment would be increased to 5% down.  For now, the minimum down payment will remain the same.

Announced FHA Policy Changes:

Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending.
Up Front Mortgage Insurance is currently 1.75% of the loan amount.   After April 5th 2010, this is going to increase to 2.25%.  For a $180,000 purchase, this would cost a home buyer about $900 more.  In addition, FHA may increase the monthly mortgage insurance premiums later in the year.

Reduce allowable seller concessions from 6% to 3%.
Buyers that want a seller to pay their closing costs will be limited to a maximum concession no greater than 3% of the sales price.  This change is expect to occur by Summer 2010.

Update the combination of FICO scores and down payments for new borrowers.
Home buyers that do not have the required minimum FICO score may increase their down payment to 10% to compensate for the lower score.

If you have questions please call 801-792-5040