FHA Considering Increasing Down Payment to 5%

HUD Considers Increasing FHA Loan Down Payment to 5%

About two weeks after legislation was introduced to raise the minimum down payment a FHA loan to five percent, FHA boss David Stevens rejected such a move, according to the WSJ.

While speaking at the Mortgage Bankers Association conference in San Diego, Stevens told the audience that limiting the pool of eligible home buyers could dampen a fragile housing recovery.

And he warned not to jump to conclusions, noting that FHA down payment alone doesn’t necessarily lead to default, which is true.  However, not having any money in the game doesn't give you much incentive to stay either.

Know doubt lenders came up with stupid loan programs and borrower's took advantage of them.

FHA's market share grew from a tiny 2% in the fourth quarter of 2006 to a staggering 23.7 percent for FHA Loans products in the fourth quarter of last year, unhealthy growth by any measure.  Certainly a concern.

So by requiring FHA borrowers to put 1.5% more in the transaction going to actually improve the loan risk.  Probably not.  Maybe a better angle to look at is to make sure borrowers have show a savings history to get to the 3.5% down payment and have money in reserves.

If a borrower never had two penney's to rub together because they spent everything and got a winfall gift for the down payment from a relative are they the same risk as someone who has show the ability to sock away their own money?