HUD’s FHA mortgages maintained a record 69% of new primary mortgage insurance written during the 4th quarter of 2008. That is the FHA loan product’s most significant share in the mortgage market in many years.

The Obama administration unveiled its $75 billion Homeowner Affordability and Stability Plan earlier this month. The home refinancing programs will enable some homeowners to refinance their mortgages into lower-cost, thirty-year or fifteen-year loans featuring fixed interest rates by making mortgage compnaies Fannie Mae and Freddie Mac refinance those mortgages that they have securitized on Wall Street.

But in the 2009 FHA loan limits are being reduced again.  FHA announced the new ceiling in the high cost markets will be $625,500. FHA mortgages in 2009 will cap out at 115% of the median home price in a county or metropolitan area. Still, many regions of the housing market will remain, as never before, eligible for FHA home loans.

o    FHA home loans can only be originated from a FHA-approved mortgage lender.

o    Down payment requirements are minimal. Buyers need only 3.5% of the house’s price tag.

o    The down-payment can be a gift from a family member, employer, local charity, or local government program.

o    FHA mortgage programs enable all ranges of credit scores with compensating factors

o    You must have a two-year employment record. The new monthly FHA mortgage payment must be less than 31% of your income, and debt to income ratio is usually less than 43% of your income.

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The Bush administration rolled out the new FHA HOPE for Homeowners Loan on October 1, 2008. It’s the Department of Housing and Urban Development’s new mortgage insurance program. The new insurance, offered through the Federal Housing Administration (FHA), will allow qualifying homeowners to refinance with fixed-rate mortgages, said Brian Sullivan, who works for HUD in Washington, D.C. This program is called the HOPE for Homeowners Act of 2008 and is part of the Housing and Economic Recovery Act. It begins on October 1, 2008 and ends in September 2011. The Federal Housing Administration (FHA) would insure the program up to $300 billion.

It was the mortgage of last resort when home sales were booming. Buyers balked at the paperwork. Sellers hated the home-repair rules. FHA lenders are anxiously awaiting the government to roll out the new FHA mortgage loans.  The Federal Housing Administration (FHA) mortgage guarantee program, long considered a backwater, has garnered newfound respect in industry and policy circles. President Bush made it the centerpiece of his mortgage relief plan.

The Federal Housing Administration, the once-viewed-as-antiquated, irrelevant Great Depression-era government agency, is suddenly emerging as the centerpiece of government efforts to bolster the U.S. housing market, reported The Wall Street Journal.

The FHA loan options have become the cheapest, and in many cases, the only alternative for borrowers who can make only a small down payment and the agency is rapidly gaining market share.

Home buyers and mortgage refinancing owners nationwide took out nearly 530,000 FHA loans in the first half of the year, 160 percent more than in the corresponding months last year. Many of the new local FHA home loans this year are FHA refinancing loans. But even in this market, where home sales are falling precipitously, FHA mortgages for new purchases jumped 170 percent.  “Now, it’s almost automatic that it’s FHA,” said Keith L. Cross, a real estate agent with Century 21 Downtown in Baltimore.

Fewer than 10 percent of mortgage applications were for government-insured loans in July 2007, the Mortgage Bankers Association said. This July, it was nearly 30 percent.  “Suddenly, we’re a good option and perhaps the best option,” said Meg Burns, FHA’s director of single-family program development. She sees parallels to the early days of the agency, which was founded during the Depression to keep financing flowing to Americans after banks failed.

FHA Changes
Starting October 1, the minimum will increase to 3.5 percent from 3 percent. Seller-funded down payment assistance also becomes a thing of the past as of October 1. This includes nonprofit groups whose assistance to buyers is funded by sellers.  FHA also says it will raise its fees come Oct. 1. Most borrowers will pay upfront mortgage insurance premiums of 1.75 percent of their loan amount rather than 1.5 percent and annual premiums of 0.55 percent rather than 0.5 percent.

The economic-stimulus bill passed by Congress and signed by President Bush earlier this year raised the ceiling on the size of loans the FHA can insure to $729,750 in the highest-cost areas, up from a previous cap of $362,790. The new limits are due to expire at the end of this year, and the new limits under the Housing and Economic Recovery Act of 2008 are lower. The new loan limits set by this Act will be $625,500.

If you’re looking to buy or refinance through FHA, now is the time to do it before these changes take place. Fill out the free loan quote request form on this page or call us toll-free.