Currently when someone purchases a home using a FHA loan, they are required to pay an upfront mortgage insurance premium. This fee can be paid or financed, and is currently at 1.75% of the loan amount. FHA will be increasing this premium up to 2.25% of the loan amount.
In an effort to have purchasers put more skin in the game, many ideas were discussed, including raising the down payment minimum from 3.5% to 5 %. It would appear the insurance premium was the victor instead… For now!
Other changes include limiting seller concessions, like paying closing costs to 3% instead of the current 6%. Once again requiring more skin in the game from the buyer.
The reason for these changes? FHA has become so popular over the last year that it insures thousands of loans per day. With that it’s foreclosure rate has increased, which means its insurance payouts have also increased. Not to mention that there are minimum requirements for reserves as compared to the amount of insurance FHA issues. The FHA has been said to have fallen below these requirements and needs cash.
In addition, FHA will attempt to hold lenders more accountable by reporting each lenders FHA performance rating to the public. The belief is that a borrower will want to go through a lender with a positive rating.
These changes will leave many borrowers out of the market, as they will not be able to save for the additional insurance premium and additional 3% in closing costs, that can now be paid by the seller.
Whether you believe this is a bad idea, since some would be home buyers will be left out, or a good idea, as it keeps FHA in a good position for future use, this is the reality of changes to come.
I did not see a specific date as of yet, but read “this summer” in one article.
Click here to go to the FHA site and read the press release.

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Thank you,
Matt Steinmetz
Envoy Mortgage- Voted Top 25 Tech Savvy Lenders by Mortgage Technology Magazine
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Concord, CA 94520
Phone 925-671-9501 x119
msteinmetz@envoymtg.com
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