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Wednesday, February 24, 2010

FHA nixes the 5% down proposition

HUD had been considering a change to the down payment requirement for the increasingly popular FHA loan. Currently at 3.5%, they were considering raising the down payment to 5%. Perhaps realizing that this would hurt an already fragile housing market and slow the recovery, they decided against this idea.

They are, however, considering another change which would increase the annual mortgage insurance premium to .85%. Currently the rate is .55% for loans over 90% LTV, which is the majority of FHA loans. Recently, the up-front mortgage insurance premium was increased from 1.75% to 2.25%.

If you are interested in a home that doesn't qualify for FHA financing because it needs repairs, the FHA 203(k) rehab loan is a great way to go. The streamline version allows for up to $35,000 in repairs and the full 203(k) allows for repairs up to the total FHA loan limit. Additional benefits may be realized because there may be fewer people bidding on a home that needs repairs and the improvements that are done to the home would customize that home to the buyer's taste.

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