The House has overwhelmingly passed a FHA reform legislation bill that would allow the Federal Housing Administration to adjust monthly premiums on mortgage insurance. The bill, H.R. 5072, FHA Reform Act of 2010, should strengthen the FHA loan insurance program while also keeping it available and affordable for the responsible homebuyer. If the FHA were allowed to raise the monthly insurance premium, this would allow them to lower the up-front premium that places a burden on cash poor borrowers at closing.
While this bill did pass, the House defeated an amendment that would have increased the FHA down payment from 3.5 percent to 5 percent. If the percentage of down payment had been allowed to increase, this would have removed a large portion of potential homeowners from being able to afford a home. Many feel that a 3.5 percent down payment does represent a financial commitment from a homeowner as well as a large enough investment in the home to insure that a borrower is serious about homeownership.
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