FHA just announced major changes to it's loan program. Currently, FHA loans are the most common loans for home purchasers due to the low downpayment and low minimum credit score. The goal of this change is to ensure FHA's long-term financial stability. Below is a brief description of the changes that will affect borrowers.

1. The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent. This is an increase from the current 1.75 percent. The good news is that FHA will continue to allow the financing of the UFMIP.
2. Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
3. FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the upfront premium.
4. Seller concessions will be reduced to 3 percent from 6 percent.

FHA is also making several lender enforcement changes.

1. FHA will implement credit watch terminations at lender underwriting.
2. Public reporting of lender performance through Neighborhood Watch scorecard system will be implemented.
3. FHA will implement, through notice and comment, indemnification against lenders through Credit Watch. Indemnification will be expanded beyond fraud and misrepresentation.
4. FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
5. FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.