Modernizing the FHA: They aren't going the right way! CONGRESS - Just leave it alone!
Measures in the bill would overhaul the Federal Housing Administration's loan insurance program, which helps homebuyers with weak credit or little cash get an affordable mortgage.
The changes proposed in the bipartisan bill would raise the FHA loan limits from 95% of an area's median home price to 110%. But in high-cost areas, the FHA loan limit may not exceed $550,000.
Under the bipartisan economic stimulus package passed in February, the cap for FHA loans in high-cost areas was temporarily raised to $729,950.
The Senate package also calls for FHA loan down payment requirements be raised to 3.5% from 3%.
For clarity, FHA currently has a minimum down payment of 2.25%. BUT, FHA requires the buyer put at least 3% of the purchase price into the transaction. So if a buyer is paying all their own closing costs, their out-of-pocket is 2.25% plus their closing costs. If the seller or a grant program is paying their closing costs, the down payment is still only 2.25%, but they MUST put at least 3% into the deal.
Learn more at http://money.cnn.com/2008/04/02/news/economy/housing_bipartisan_draft/index.htm?postversion=2008040311
Joe, thanks for bringing this to my attention. While I agree that some reforms could well be good in the long run, right now might not be the time to do it.
Dan