FHA Modernization – Good News For Buyers!

    This information was published by the National Association of Home Builders.  You can view the full articles by visiting their official online weekly newsletter at http://www.nbnnews.com/.

    Well you’ve probably heard by now that last week legislation approved H.R. 3221, the Housing and Economic Recovery Act of 2008. It contains several provisions that will allow the FHA to deliver a range of mortgage products more effectively. However, the FHA’s minimum downpayment has been increased from 3% to 3.5%. The bill:

    • Increases the current limit for FHA-insured mortgages to enable deserving potential buyers to purchase homes in more markets across the country. “Permanently raising the FHA loan limit to 115% of an area’s median home price, up to $625,500, will enable more creditworthy borrowers to purchase an FHA-insured home in high-cost markets,” said Dunn.
    • Also increases the floor for area FHA limits from $200,160 to $271,050.
    • Enables the FHA to simplify requirements for condominium loans, which have often been burdensome and have differed significantly from the rules applied to mortgage loans for detached single-family homes.
    • Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans. The bill creates a higher, nationwide uniform loan limit equal to $625,500, reduces and caps the maximum fee lenders can charge seniors for FHA reverse mortgage loans and establishes protections to prohibit requiring seniors to purchase other financial products in conjunction with these loans. This will help more seniors who are at least 62 years old access the equity in their homes without having to make mortgage payments until they move out.
    • Permits the FHA to extend the maximum loan maturity to 40 years to enable borrowers to reduce their monthly mortgage payments while ensuring that some part of the monthly payment is used to reduce the outstanding loan balance.
    • Allows the FHA to charge higher mortgage insurance premiums, but places a one-year moratorium on implementation of risk-based mortgage insurance premiums.

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