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A little Tougher to get an FHA loan…
It's about to get tougher to qualify for a Federal Housing Administration (FHA) mortgage, often considered the replacement loan for the collapsed subprime market.
Moving to head off the financial impact of defaulting borrowers, the FHA is adding more-stringent lending requirements and higher fees borrowers must pay to get the federally-insured loans.
The FHA is more exposed to defaults than ever. By some estimates, as much as 50 percent of all purchase loans in some areas are FHA insured. Before the housing collapse, FHA wrote only 3 percent of all home loans.
Mortgage insurance is paid by borrowers, typically when the down payment is lower than 20 percent. Borrowers pay, but the coverage protects lenders with cash benefits should the borrower default. When lenders foreclose against homeowners with the coverage, it triggers mortgage insurance benefits for lenders to help pay off the mortgage.
Beginning this spring, the FHA will raise mortgage insurance fees that borrowers must pay, cap the amount of cash that sellers can contribute for closing costs and require higher down payments for the borrowers with poor credit scores.
• The new upfront mortgage premium will cost borrowers 2.25 percent of the loan amount, up from the current 1.75 ... more

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