FHA To Announce Changes Today

The WSJ reported that FHA will announce today that they will increase the upfront mortgage insurance premium charge from 1.75% to 2.25% along with lowering the seller contributions from 6% to 3%.  I think the seller contribution part is smart and I guess they have to increase the premiums to protect from future losses but it still doesn’t address lending with regards to debt to income ratios and reserves. 

The articles also states “The FHA will keep minimum down payments at the current 3.5% level for most borrowers. But the agency will require riskier borrowers with credit scores below 580 to make a minimum 10% down payment. While the FHA doesn’t have a credit-score cutoff, most lenders require a minimum 620 score.”  If you have below a 620 credit score you shouldn’t be able to buy a home unless you put at least 30% down. That is just stupid and what is even worse is the fact they FHA has been lending to borrowers with 580 and lower credit scores up until today with just 3.5%.