Starting October 4^th, the Federal Housing Administration (FHA) will implement changes to its FHA-backed mortgage which will increase the cost for a buyer to obtain an FHA loan.  FHA has experienced an escalated amount of delinquencies during the mortgage recession.  In the third quarter 2010, 14.36% of FHA loans were past due, according to the Mortgage Bankers Association.  FHA reported that its reserve fund has dropped to 0.53% of its insurance guarantees.  This is well below the 2% ratio which is mandated by Congress.  The fund covers losses on mortgages the agency insures.

The following changes will be made to compensate the rapidly depleting reserve fund:

1)  Up-front mortgage insurance premiums will decrease from 2.25% to 1.00%
2)  The 0.55% annual premium will be increased to 0.85% for mortgages with loan-to-value ratios up to and including 95%, and to 0.90% for loan-to-value ratios above 95% (the majority of FHA loans)
3)   Borrowers will be required to have a credit score of at least 580 to qualify