HUD's new mortgagee letter (ML) clarifies the new down payment requirements pursuant to the July Housing Bill. All minimum downpayment calcs are now the same, regardless of state. The new maximum FHA loan amount will be 96.5% of the purchase price or appraisal whichever is less. This means our buyers will have to come in with more cash.

The upfront private mortgage insurance can be financed above that but in no cases can the loan exceed 100% of value. This will be effective on case numbers pulled 01/01/09 or after. No rounding is required for your loan amount and 6% seller contributions will still be allowed. Gone are the days of 2.25% down and .75% in allowable costs. For specialty loans like the 203(K) rehab loan and EEM's (energy efficient mortgages), the guidelines stay the same. EEM's will have different requirements. That info will be coming out in a subsequent ML, but look for something like energy efficient improvements are added dollar for dollar to the loan amount regardless of loan to value.

When doing a refinance watch out for the 100% maximums. They will apply even to FHASecure and even after applying financed private mortgage insurance your loan to value cannot exceed 100%.

There are more details, such as using government issued "soft" or "hard" seconds to exceed the 100% threshold. For more information review the ML here.

Gerry Suarez, Jr.

Your HUD Loan Pro!