FHA Minimum Down Payment Increase, As it Applies to 203K

Beginning Jan 1st, 2009, the minimum down payment on all FHA purchase transactions will increase from 3% to 3.5%.  As the mortgagee letter states, "limit the total FHA-insured first mortgage to 100 percent of the appraised value, and require the inclusion of the upfront mortgage insurance premium (UFMIP) within that limit."  This does not mean that FHA is 100% financing, but rather the 96.5% LTV + the Upfront MIP (normally 1.75%) must be less than 100%.  Since 203K will go to 110% of the appraised value, the 100% limit does not apply.

Specialty products with higher LTVs: Section 203(k), Section 203(h) for disaster victims, and FHA's Energy Efficient Mortgage (EEM) programs are not affected by the LTV limit. All existing policy guidance regarding the rehabilitation program under Section 203(k),including streamlined (k), mortgage insurance for disaster victims, and the EEM programremain in effect.

The 6% limit on seller contributions toward closing costs/pre-paids remains unchanged.

HUD's $100 down REO program will continue.