Posted By Alan Donald @ Jan 25th 2010 8:12am In: Mortgages
FHA Toughens Down Payment Rules, Raises Mortgage Insurance Premiums
The Federal Housing Administration (FHA) announced that will raise the minimum down payment required for its higher risk borrowers, limit the allowable seller's contributions and increase their mortgage insurance premiums.
To build capital and reduce risk, the FHA said that it will raise mortgage insurance rates and tighten credit score requirements. The major changes include:
- increasing upfront mortgage insurance premiums from 1.75% to 2.25%;
- reducing the maximum seller contribution to buyer's closing costs from 6% to 3% of purchase price; and
- increasing the level of FICO scores from 500 to 580, below which a down payment of 10% is required (as compared to 3.5% for those above 580).
At this point, the expected timing of the upfront mortgage insurance premium increase will be in the spring, and the other changes will take place over the summer.
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