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Changes to FHA lending


Down town Kansas City MO courtesy fprec.comThis morning, in an interview with Diana Olick of CNBC, David Stevens (the FHA Commissioner) discussed changes coming to FHA this summer. Besides a slightly higher down payment and stricter underwriting criteria, FHA is increasing their upfront mortgage insurance premium from its current 1.75% to 2.25% on all applications received on or after April 5, 2010.

However, not all news is bad news. Under the FHA Reform Act of 2010, anyone with a credit score between 500 and 579, and at least a 10% down payment, can probably obtain FHA financing. Additionally, purchasers with 5% or 10% to put down on a home could see lower mortgage insurance premiums.

Other changes include decreasing the amount of seller contributions allowed from the current 6% down to 3%, and increasing the down payment amount to a straight 3.5% of the purchase price. When compared to conventional loans, these changes make FHA loans a more expensive loan option.  Even so, many first time home buyers have trouble obtaining the 5% down payment required on conventional loans.  FHA calculations estimated a reduction of 40% in loan originations it they were to implement a 5% down payment option.

While FHA loans only account for about one-third of all home loans, it is estimated that 51 percent of African American home buyers and 45 percent of Hispanic families who purchased homes in 2008 used FHA financing. Today, many home buyers look to the FHA 203K loan in order to purchase and repair bank foreclosed and distressed properties.

To find out more information on FHA loans go to the HUD website or send your questions to


  • MitraJanine 5 years ago

    Homeowners' insurance isn't a luxury, it's a necessity. In fact, most mortgage companies won't make a loan or finance a residential real estate transaction unless the buyer provides proof of coverage, contact me for free home insurance quote

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