The Federal Housing Administration will raise the minimum down payment for its least credit-worthy borrowers, the agency announced on January 19.
Borrowers with credit-rating scores below 580 will be required to put down at least 10 percent. Those with a credit score of 580 or better will still be eligible for down a payment of only 3.5 percent.
The FHA will also increase its upfront mortgage insurance premium from 1.75 percent to 2.25 percent. In addition, the agency is expected to seek congressional approval for raising annual mortgage insurance premiums — the premiums paid by borrowers over the life of the loan — above the current 0.55 percent maximum. The new limit it will seek has yet to be announced.
These changes are among a number the FHA is making to ensure its own long-term financial soundness. By modestly tightening some program requirements, the FHA is trying to strike a balance between stabilizing the market with qualified buyers and overwhelming it with unqualified borrowers.
For more information on the FHA changes, see a summary of all changes at REALTOR.org.
Source: Reuters News, Corbett B. Daly (01/19/2010)