With its extremely low down payment, the Federal Housing Agency (FHA) loan is the primary method for financing for homebuyers across the country. According to a recent Wall Street Journal article, the FHA loan will be undergoing some changes that could have a major effect on affordability.“About 56% of mortgages for a home purchase were FHA-insured in 2009, up from 6% in 2007,” reported the WSJ. According to the Mortgage Bankers Association, up to 80% of those who received an FHA loan were first-time homebuyers.
Currently these loans can be for up to $729,750 in high-cost markets, but the Obama administration is recommending that these high limits expire in October. $625,500 would be the new high limit.
More changes to the FHA program are seen on the horizon. “On April 18, the annual mortgage-insurance premium on new FHA loans is set to rise by a quarter of a percentage point on 30- and 15-year mortgages,” states the article. In addition, some predict that the standard 3.5% down payment could soon rise to 5%.
What do you think about these expected changes to the program and the impact it might have on the market?
FHA wants to be 20-25% of all mortgage looans and at times have been 40-55% of mortgage loans. Therefore they have to protecvt themselves from risk and this is one way to accomplish this goal. Making the mortgage insurance premium more like conmventional pricing they accomplish protection from higher premium and ensure each approved buyer qualifies in a stronger fashion.
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