Through The Wire – October 1, 2008

2008 has brought a significant amount of changes to the mortgage business.  We have seen banks tighten up lending patterns by eliminating high risk programs and adjusting guidelines.  With banks veering far from the traditional style of underwriting for mortgages the necessity for change has been needed for quite some time.

Through the midst of all this change, the Department of Housing and Urban Development (HUD) has been making changes to the FHA loan program to benefit homeowners.  In order to keep the FHA program available to homeowners and potential homeowners, HUD has also had to make some necessary changes.  As of October 1, 2008 there will be several changes to the program.  The three most significant changes to the program include: down payment assistance program elimination, minimum down payment increase, and mortgage insurance premium increase.

For years HUD has allowed a borrower for an FHA loan to use a non-profit down payment assistance program.  At least for now the program will not allow a borrower to use these programs.

The minimum down payment for an FHA purchase will increase from 3% to 3.5%.

HUD also requires borrower paid mortgage insurance.  The upfront premium will be increased from 1.5% to 1.75% and the monthly premium increased from .50% to .55%.

There will be more information regarding changes released in October, so stay tuned for more information.