New FHA Loan Rules
In all the hoopla about Fannie Mae and Freddie Mac over the weekend, it is not surprising that some smaller news revolving around FHA loan rules has been somewhat overlooked. But there is some merit in bringing these new rules to light — if only to take a break from the incessant chatter about Fannie and Freddie.
Mortgage down payment assistance loophole to close
One of the things that homebuilders have done in the past is to offer mortgage downpayment assistance programs. These are programs that use a loophole in FHA loan rules to circumvent the rule of taking out a loan in order to make a down payment on a home. What you do instead is make a “donation” to an approved charity. This charity then provides money to help you make a down payment. It’s kind of circular logic, but there you are.
The main reason that this loophole will close is due to the information that nearly 40 percent of FHA borrowers experiencing foreclosure took advantage of these down payment assistance programs to buy their homes.
As of October 1, though, FHA loan rules are changing to close this loophole. Which means that many builders — in addition to offering free upgrades and other incentives — are likely to make a promotion push using this information.
New minimum mortgage down payment
Up until now, FHA loan rules stipulated that you only need a 3 percent down payment to get the loan. This is changing. Starting on Oct. 1, it will be necessary to put down 3.5 percent of the home’s purchase price in order to take out an FHA loan. This will make it a little more difficult for people to come up with the qualifications necessary to get an FHA loan.
Tags: down payment assistance, FHA loan, home mortgage loan, FHA loan rules,
Fannie Mae, Freddie Mac, mortgage loan blog
September 10th, 2008 at 11:51 am
[…] Monday, I reported that the FHA loan program is about to get a couple of new rules, including one that closes the loophole allowing borrowers to use down payment assistance programs […]
October 29th, 2008 at 11:46 am
[…] reason is that with FHA financing, a 3% down payment was required (it’s gone up to 3.5% under new FHA loan rules). At the time, people didn’t want to come up with a 3% down payment when they could go the 0 […]