Good News for Homebuyers; FHA Reform Bill Passed by House
Yesterday the U.S. House of Representatives passed H.R. 5072, the FHA Reform Act of 2010 which might good news for home-buyers that may need to rely upon an FHA loan for a home purchase but, not so good for taxparers. The bill will still need to be passed by the Senate and then signed into law by the President, but a big first step toward this was taken by the House passing it.
Highlights of the bill that I think are important to home-buyers are:
- The down-payment requirement for FHA loans will remain at 3.5 percent. There was an amendment to the bill that would have increased the down-payment requirement to 5 percent but was defeated, leaving the down-payment requirement at the present 3.5 percent level. The National Association of REALTORS estimated that, if the down-payment was increased to 5 percent, there would be 300,000 potential home-buyers removed from the market as a result. This is not a big deal though because this is the current situation. If lenders will even touch borrowers below a 580 credit score they are required to put more money down.
- FHA will lower it’s up-front fee it charges borrowers for FHA mortgage insurance to 1 percent but will increase the annual premium they charge (which is added on to the payment) to 0.85 percent. This will help borrowers by lowering the up-front “out of pocket” expenses they incur, but will help FHA’s financial stability by increasing overall revenue from the premiums. This is a touch one as this will increase the debt ratio of the buyer and if they default then HUD doesn’t get the revenue stream. Personally I like a tired FHA MIP schedule. Those with stonger credit get cheaper insurance than those with lower credit. Simple risk allocation.
- FHA’s loan limits will be increased for multifamily elevator buildings and in extremely high-cost areas, thus opening up the option of FHA financing in more markets.
July 25, 2010
10:45 pm #comment-1
Great site. A lot of useful information here. I’m sending it to some friends!
August 7, 2010
2:16 pm #comment-2
Hello – I was told by my Mortgage Broker that FHA required Home Owners Assocation Dues to be escrowed. Do you know if this is true. I live in Florida.
Thank you.
August 17, 2010
11:56 pm #comment-3
Yes, it’s true. They will also collect 2 to 3 months the taxes and homeowners insurance and put it into escrow, unless you elect not to have an escrow, but be careful the lender may increase the rate for this, if they elect to do this at all?
May 17, 2011
7:40 pm #comment-4
I live in parma idaho. I was told many diffrent things about fha. I was told all out building have to be painted good shape that no paint on outside chipping siding cant touch the ground has be same with the house. Is that true? how would i find out if all that is true?