Major FHA changes coming soon

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FHA home loans may soon experience a major revival as a favored type of home financing. Pending legislation would reduce the minimum down payment required (possibly to zero percent) and will increase the maximum amount that can be borrowed.The FHA Modernization Act has finally been approved by Congress. After a bit of fine-tuning by a conference committee, it will be ready for the President's signature. When signed, it will be the biggest overhaul of loans insured by the Federal Housing Administration in many years, and will serve the needs of home buyers and owners who want to refinance their mortgage much more effectively."The bill itself is really very simple, the proposal straightforward," said Brian Montgomery, with the Dept. of Housing and Urban Development. "It does just what its name suggests. It modernizes the 72-year-old Federal Housing Administration and restores the agency to its intended place in the mortgage market -- nothing more, nothing less. Yet, the impact of this bill may be tremendous." One segment of home buyers most benefited from the changes is persons and families living in particularly high priced areas. The new law would either raise the FHA loan limit to $417,000, the current limit for conforming home loans, or the maximum could be tied to the median home price in local regions. Either way, it would make the loans viable for many more buyers and owners, particularly in coastal California and Northeast communities where prices are highest. The required minimum down payment, now 3 percent, would be reduced to zero percent (House version) or 1.5 percent (Senate version). In the House version, the FHA would be able to vary the insurance premiums by applicant risk levels. The more high-risk applicants could pay higher premiums. The Senate version includes a one-year moratorium on a risk-based pricing system. These items will be worked out in a conference committee. call Kim Schieldknecht with any questions. 513-587-3599