FHA Proposes Down Payment Changes For Larger FHA Loans

According to HUDNo.13-010, “FHA will announce a proposed increased down payment requirement for mortgages with original principal balances above $625,500.  The minimum down payment for these mortgages will increase from 3.5 to 5 percent.”

“This change, coupled with the statutory maximum premiums charged for these loans, will help protect FHA and further facilitate its efforts to encourage higher levels of private market participation in the housing finance market.”

In a statement published in the Federal Register Volume 78, Number 25, you’ll find some supplemental information including the following: “…the maximum LTV will be limited to 95 percent for loans in excess of $625,500. LTV limits do not include the addition of the Up-Front Mortgage Insurance Premium (UFMIP).”

The FHA proposal would exempt certain loans from this higher down payment. “Loans made pursuant to the FHA Streamline Refinance without an appraisal program, which has no LTV calculation, and the 203(k) Rehabilitation Mortgage Insurance Program, which utilizes two different LTV calculations in addition to the cost of improvements, are exempted.”

At the time of this writing, these changes are proposed and are not active–yet. According to official sources, a “final rule” on this issue will be published at some point, which would codify these changes. We’ll publish full details as they become available.

Do you have questions about FHA loans or FHA refinance loans? Ask us in the comments section.