How Will the FHA's Money Woes Affect Borrowers?
✉️ Want to forward this article? Click here.
For homebuyers who aren’t able to pull together a 20 percent down payment, FHA-backed loans, which allow for down payments as small as 3.5 percent of the home price, have been a boon in recent years.
However, the agency reported a deficit of $16.3 billion earlier this month, which means that it might require a taxpayer bailout for the first time in 78 years. It will also mean that FHA loans are going to get more expensive for borrowers.
According to a Bloomberg article, the current troubles are largely related to policies put in place during the housing boom that led to defaults and delinquencies. The agency is now working to adjust their policies in order to avoid a bailout.
So, how will all this impact consumers? Here are a few implications:
- The FHA loan limits will likely come down. — As we reported last year, the FHA has been pushing loan limits higher in recent years, to the consternation of opponents. Currently, the FHA is able to back loans as high as $729,750. (In the past, the ceiling has been as low as $362,900.) The limit will likely be lowered in light of the financial troubles.
- Borrowers will have to pay increased insurance premiums. — FHA loans will become more expensive for borrowers, as the agency is raising the annual insurance premium by 0.1 percentage point in January, raising monthly costs by $13, on average. Also, right now, the agency allows borrowers to stop paying mortgage insurance after a certain period of time (5-10 years) once certain requirements have been fulfilled; the FHA is planning to change that policy, so that borrowers will pay insurance over the entire life of the loan.
- The required minimum down payment may increase. — One of the most alluring aspects of the FHA loan is its low down payment requirement of 3.5 percent of the total purchase price. Those that have been pushing to raise the down payment in past years may get their wish in light of recent news.
See other articles related to: fha
This article originally published at https://dc.urbanturf.com/articles/blog/how_will_fhas_money_woes_affect_borrowers/6323.
Most Popular... This Week • Last 30 Days • Ever
A look at the closing costs that homebuyers pay at the closing table.... read »
3331 N Street NW sold in an off-market transaction on Thursday for nearly $12 million... read »
In this article, UrbanTurf will explore the considerations and steps involved in buyi... read »
The most expensive home to sell in the DC region in years closed on Halloween for an ... read »
Paradigm Development Company has plans in the works to build a 12-story, 110-unit con... read »
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Start browsing below!
First-Timer Primers
Intro guides for first-time home buyers
Unique Spaces
Awesome and unusual real estate from across the DC Metro