More Changes for FHA Announced

Mortgage and Lending with Alterra Home Loans
THURSDAY, JANUARY 21, 2010 Re-print of Jed Wunderli's blog - FHA has announced that a number of changes will be made in an effort to get the insurance fund back up to the level mandated by congress. The changes that were announced will take effect in the summer. The up-front mortgage insurance premium will be increased from 1.75% to 2.25%. The amount sellers can contribute to closing costs will now be capped at 3%, down from 6%. The down payment requirement for people with a credit score of 620 or greater will remain at 3.5% but for those with a credit score of 580 or less, a 10% down payment will be required. The odd thing is that this is how the release was announced - there is a window between 580 and 620 that was not discussed or addressed. Less than 1% of all FHA loans funded last year had a credit score below 580 and there were also very few (relatively speaking) with credit scores between 581 and 619. Studies have shown that FHA loans with credit scores below 620 have significantly higher default rates so many lenders have elected to implement a minimum score of 620. As for the insurance fund, the current balance is about $3.6 billion which is roughly .5% of the $685 billion in outstanding FHA-insured loans. Congress has mandated long ago that the fund maintain a minimum balance of 2% of the outstanding loans that are insured. This would mean that the fund needs to be around $13.7 billion. Hence, it’s about $10.1 billion short of the mandate. Update: The FHA is considering increasing the annual mortgage insurance factor from .55% to .85% on loans over 90% LTV. This is still in the discussion stages and will not take place until later in the year if it does become effective. I'll post more news as information becomes available. Have a great day and feel free to comment or contact me if you have questions regarding the new FHA guidelines or mortgage financing.
Posted by

D. Jed Wunderli

Certified Mortgage Planner

Alterra Home Loans


Comments (4)

Corey Chase
Silvercreek Realty Group - Meridian, ID

More changes are coming

Mar 11, 2010 01:29 AM
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Welcome to ActiveRain Jed! This is a great place to learn anything you need to know about the real estate business or about getting the most out of blogging and marketing yourself online. If you have any questions just stop by my blog. I am an Ambassador so I am here to help you get the most out of ActiveRain.

Have fun and enjoy!


Mar 11, 2010 11:47 AM
Sergio Rebollo Jr.
Real Estate TeamMates - Miami, FL

Welcome to ActiveRain. This is a great community to network with others as well a great place to learn from other's experiences and knowledge. I've enjoyed it; I hope you enjoy it as well.

Mar 14, 2010 01:53 AM
Letitia Stevenson
BHHS Fox & Roach | - Greenville, DE
Listing Agent DE/PA/MD, Digital Marketer & Coach


Welcome to Active Rain! Active Rain is a great place to share your knowledge, expertise and thoughts, as well as network and learn so much from the vast pool of talent already onboard.

Welcome Aboard and Much Success!

Apr 15, 2010 03:32 PM