The Federal Housing Administration, which is the largest insurer of low-down payment
mortgages, announced last week that it will raise premiums by 10 basis points, or 0.1 percent,
on most of the new mortgages it insures.
A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more
will now pay an annual insurance premium of 1.3 percent of their outstanding balance.
Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
The FHA said it also will raise premiums for borrowers with jumbo loans – loans of
$625,000 or more – by 5 basis points, and increase the minimum down payment
requirement on these loans to 5 percent from 3.5 percent.
Additionally, the FHA said it will require most buyers to pay insurance premiums for the
life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel
premium payments once their debt fell below 78 percent of the principal balance. One
exception will be for borrowers who put more than 10 percent down at the time of
Other new policies include a requirement that any mortgage for an applicant with less
than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten
manually. Lenders who want to issue loans to these applicants must be able to
adequately document why they decided to approve the loans.
The FHA also decided to put new restrictions on reverse mortgages, no longer
permitting retirees to take such large, upfront payments.