Fha Loan down Payment Increase in 2009

FHA Loan Down Payment Increase in 2009

Purchasing a new home has become even more difficult, with the downturn in the economy. Since the Federal Reserve has lowered the interest rates to a margin between 0% and 0.25% the home loan rates have increased. One of the most popular home loans, the FHA (Federal Housing Administration) Loan, were to increase the minimum down payment required from 3% to 3.5% beginning the first of October; however, the date has been moved to January 1, 2009.

FHA Loans were first created in the great depression of the 1930’s, allowing for individuals whom under normal circumstances could not afford a home, to be able to borrow money towards the purchase of a new home. This program, created to assist lower to moderate income families to purchase homes, has caused an even greater gap in the housing industry.

Applying for an FHA Loan meant that institutions such as AmeriDream, the seller, would provide help in closing costs, prepaid costs, and a contribution towards the 3% down payment. After changes have been made to the FHA Loan, the minimum down payment has increased to 3.5%, while banning the “seller-funded” down payment programs. This means the buyers have to contribute a minimum of 3.5% of their down payment along with closing costs and prepaids in the purchase of their new home. With the slumping housing market; decrease in the interest rates; and an increase in the mortgage rates, the FHA Loan that was meant to assist home buyers, would probably cease to exists within the next few months due to the sharp changes that were put into effect at the beginning of this year.