FHA Down Payment Requirement Could Increase to 5%

Now may be the time if you are planning to buy a home and take advantage of the low 3.5% downpayment required for an FHA mortgage.

In 2008, the FHA mortgage minimum down payment was raised to 3.5% from 3%, as part of the Housing and Economic Recovery Act and now lawmakers may be trying to raise it again.

On October 1, Rep. Scott Garrett (R-NJ) introduced a bill, the ‘FHA Taxpayer Protection Act of 2009’, that if passed, would increase the minimum down payment requirement for FHA loans to 5%.

Recent news has trumpeted the increasing default rates of not only mortgages but specifically of FHA mortgages. With the share of mortgages that are FHA on a sharp increase, there is concern that FHA reserves (that cover defaults) may decline to below minimum levels. Even if the minimum downpayment does not rise, there will likely be a tightening of FHA lending guidelines.

Stay tuned y'all!