Filed Under Buying, Financing, Lending · Tagged: down payment, fha · Print This Article
The FHA Commissioner cautioned against further increases of the down payment requirement at a subcommittee meeting earlier this month. There is already a list of proposed changes to the FHA loans, designed to shore up the agency’s cash reserves, but some were pushing for an increase of the minimum down payment from the current 3.5% to 5%.
Rep. Scott Garrett (R-NJ) introduced a bill to raise this down payment last October. The bill would have to be sent to the floor and voted on before this increase would happen.
Commissioner David H. Stevens stated that this would eliminate 300,000 new buyers from the market, which would be a 40% drop. The administration “determined after extensive evaluation that such a proposal would adversely impact the housing market recovery,” Stevens said.
Raising the down payment from 3.5 to 5% would give the FHA a $500 million boost to the FHA’s cash reserves. But the already planned changes will already provide $4.1 billion. (Down payments will be higher for those with lower credit scores.)
NAR agrees with keeping down payments low. “As the leading advocate for housing issues, NAR believes that one of the best ways Congress can help strengthen FHA is to quickly consider and pass legislation that would make current loan limits permanent,” President Charles McMillan said. “It’s important to note that higher balance FHA loans perform better than lower balance ones. While some argue that higher balance loans put taxpayers at risk, such loans actually strengthen the program and reduce risk to the fund.”
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Associated Press
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