NAR is reporting that on September 12th, the US Department of Housing and Urban Development (HUD) released a letter outlining new downpayment and maximum mortgage requirements as found in the Housing and Economic Recovery Act of 2008 (HERA).
The first requirement is that the Mortgagor will pay in cash (or a cash equivalent) not less than 3.5 percent of the appraised value of the property. This will alter certain loan programs. The second new requirement is that the variable loan-to-value (LTV) limits that were based on the combination of property value and average closing costs by state (known as “downpayment simplification”) will be eliminated.
The third requirement states that the Federal Housing Administration (FHA) insured first mortgage is limited to 100 percent of the appraised value and will also require the inclusion of an upfront mortgage premium within this limit. The revised requirements take effect for all new FHA loans assigned on or after January 1, 2009.
The letter further clarifies that closing costs may not be used to help meet the minimum 3.5 percent downpayment requirement. While Sellers will still be permitted to provide financing concessions of up to 6 percent of the sales price, the LTV is going to be 96.5 percent. Certain refinances, including FHASecure where there is no “downpayment”, are not subject to the 3.5 percent downpayment requirement.
>>>>>Click Here to read the HUD statement
