New bill proposes increase in FHA down payment

Shared by Savior70 on Sat Oct 03, 2009 4:40 am
Hi, A new bill introduced by Rep. Scott Garrett (R., N.J.) proposes to increase the minimum down payment requirement from 3.5% to 5%. The bill comes at a time when many are concerned about a projected fall of reserves for FHA-backed mortgages below the Congress mandated level of 2%. Those in favor of the bill argue that if the reserve does drop below the specified limit, FHA would need to use taxpayer's money. Thus, quality control and other measures should be taken in order to reduce the risk to the taxpayers. Apart from the proposed rise in the FHA down payment amount, the bill also seeks to eliminate FHA financing of closing costs. Source: http://blogs.wsj.com/developments/2009/10/01/bill-would-require-higher-down-payments-for-fha-backed-loans/

Community Members Opinion

hemsleysue

Joined: 13 Sep 2009

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Posted: Sat Oct 03, 2009 4:53 am Post subject:

now govt has started tightening the rules.

Jessica
Jessica

Joined: 08 Jun 2004

Community Mentor
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Posted: Sat Oct 03, 2009 5:59 am Post subject:

Well Savior, if the Bill is signed into law, I think it'll have an adverse effect on the housing and mortgage market. With conventional lenders having tightened the mortgage lending criteria, FHA loan has been a preferable option for many. But if the down payment is raised to 5%, it'll be a bit difficult to apply for a mortgage, especially for those who don't have an excellent credit score. Another concern is that the FHA would probably stop financing the closing costs. The reason behind this is, the FHA is likely to experience a shortage of reserves which in turn may force it to raise its insurance premium. But till now, FHA loans have helped a lot in reviving the housing market when in need. So, it needs to be seen as to what stand the Obama Administration and the Congress takes on this issue. Regards, Jessica _________________ http://jessica.mortgagefit.com/

sunnyca2009

Joined: 04 Aug 2009

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Posted: Sun Oct 04, 2009 11:58 am Post subject:

This not going to help the housing market which is already in a bad shape

smithsussane
smith.sussane

Joined: 18 Sep 2008

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Location: Alaska

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Posted: Sun Oct 04, 2009 10:05 pm Post subject:

Hi Savior, I agree with Samantha. When sub-prime lending was gaining its ground, it was FHA which required borrowers to have 3% down payments along with full documentation of their income in order to qualify for a loan. With the collapse of the sub-prime mortgage market, FHA was considered as the most liberal lenders in the mortgage market. As a result, loans backed by the FHA jumped to 21% of all loans made in 2008. Now, as FHA is increasing its down-payment limit, a large number of borrowers would face issues in getting mortgage as there are many who won't be able to come up with 5% down-payment. We'll have to wait and watch as to how it will affect the mortgage market which has just started recovering from the crisis. Sussane


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