FHA Mortgage Down Payments May Be On The Rise

Abill introduced in congress last week would require homebuyers to put down a larger down payment on loans backed by the Federal Housing Administration.

It would increase the minimum down payment for FHA-insured mortgages from3.5% to5%, and prohibitFHA financing of closing costs.

“TheFHA is supposed to get families into homes,” said Walter Neil of Franklin Loan Center. “They help them get in for low down payments.”

Neil saysdenying closing costs as part of the mortgage would make it harder for people to get into homes.

“Idon’t agree with them forcing buyers to cover all their own closing costs because then, it’s almost like you have to put down five-percent plus five-percent for closing costs so that’s almost ten percent which would make it more difficult for a lot of families to buy which is exactly opposite of what fha is in business to do.”

The bill’s author,Representative Scott Garrett of New Jersey, says it’s an effort to raise additional money to ensure that theFHA maintains it’s financial soundness.

On his website he says:

“…the benefits of promoting homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the american taxpayer to that risk. As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage.”

House Republicans say the administration and congress are exposing taxpayers to losses.

It would still need democratic leadership to sign onto the bill before it becomes law.