FHA Loan Modernization
The U.S. House of Representatives has passed a bill which will increase homeownership opportunities for millions of Americans by modernizing the Federal Housing Administration (FHA) and returning it to its traditional role as an important financing option in today’s housing market.
The Expanding American Homeownership Act will:
1) Eliminate the current statutory three percent minimum down payment, reducing a significant barrier to homeownership. The "new” FHA would offer a variety of down payment options.
2) Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.
3) Increase and simplify FHA’s loan limits. FHA’s loan limit in high-cost areas would rise from 87 to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit. This change is crucial in today’s housing market. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets.
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