Posted: Mon Jul 03, 2006 10:24 pm Post subject: FHA Modernization Act for credit-risk, low-income borrowers
The Federal Housing Administration (FHA) has proposed the Modernization Act in order to provide fair pricing for high credit-risk borrowers looking for subprime mortgages.
Important provisions of the Act are given below.
New risk-based FHA mortgage insurance premium:
The FHA insures mortgages and charges a standard premium from borrowers having different credit profiles. The premium is charged on a monthly basis at the rate of a half-percent per year of the total loan.
However, the FHA now hopes to revise the premium structure by charging premiums based on the credit profiles of borrowers. This implies that high risk borrowers will be paying larger premiums and low-risk borrowers can manage to pay low premiums.
FHA loan limit to go up:
The FHA intends to offer a higher loan limit for borrowers in high cost areas. The limit is expected to rise from 87% to 100% of the conforming loan limit ($417,000) offered by government-sponsored enterprises. The loan limit for the low cost areas would go up from 48% to 65% and that of the median areas would increase from 95% to 100% of the local median home price.
Higher loan limit for Manufactured Housing:
The loan limit for manufacture homes is likely to go higher. Besides, the portfolio insurance which limits the amount that a lender can get back from default in loan payment would also be removed.
Condominiums to be treated as single-family property:
The FHA offers insurance policies for mortgages on condominiums and regards such a property as multi-family unit. But the FHA now proposes to consider condominiums as single-family unit. So, borrowers would not have to carry out environmental inspections of the entire property and fulfill certain criteria for getting insurance policies. All that they need to do is to provide certification of occupancy and certification from the builder.
The provisions of the new Act are such that the Federal Housing Administration can compete in the housing market and make housing opportunities easily accessible to low-income buyers.
Posted: Mon Jul 03, 2006 10:46 pm Post subject: RE:
Hi,
It's a good move by the FHA. Let's hope that low credit borrowers can get some benefits out of this. Anyway, I have gone through some other provisions also. They are;
Flexible down payment option:
The new Act would allow borrowers to choose the amount of down payment they can afford. So, it wouldn't be mandatory to make a 3% minimum down payment.
No Cap on FHA loans for seniors:
Under the Act, the FHA would remove the cap on the number of HECM loans for seniors.
The FHA has come up with a good initiative in order to compete with the subprime market. The subprime market develops housing programs for poor credit borrowers and first time buyers having low income. Such borrowers have no other option but to deal with subprime lenders.
Subprime lenders charge high interest rates for loans that are available to good credit borrowers at better rates and terms. But now that the FHA has proposed the Modernization Act, low credit borrowers can at least avoid paying higher charges and interest over the loan term. Moreover, they can also avoid being a victim of abusive lending practices that are quite common in the subprime industry.
Posted: Tue Aug 21, 2007 6:00 am Post subject: want to purchase a home
i am on ssi and have never purchased a home i found a home for 10.000 down and 35.000 on a land contract total price is 45.000 if you or anyone you think can help me please contact me 616-696-3910.jwoerpel@yahoo.com thank you janice woerpel
Normally lenders would not require you to provide anything which states that the income should continue for another 3 yrs. If you obtain a Social Security Award Letter then it will work.
Caron
