Mortgage California Blog

FHA Loans Could Undergo Changes

March 25th, 2011

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?

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