One of the most venerable home mortgage loan programs is the FHA home loan program. This program, administered through the Federal Housing Administration is designed to help homebuyers get approved for better loan terms. Now, with the current housing downcycle making things more difficult in terms of lending, and would-be homebuyers wary, the Mortgage Relief Act just passed by the House is changing some of the FHA home loan rules.

The new rules have lifted the ceiling on loan amounts in the program to $417,000. This means that homes in higher-priced markets can be bought using the FHA home loan program. Additionally, things are made easier for homebuyers with the new rule that reduces the amount required for a down payment. Now, instead of a 3% down payment, one only needs 1.5% of the home purchase price as a down payment.

A Sedona real estate blog points out that, even with the new rules, there are still caveats to the FHA home loan program:

However, FHA home loan rules do require that you have reasonably good credit, and a down payment is still necessary.

Your debt-to-income ratio will also be examined before you are approved for the FHA home loan program. The nice thing about the restrictions of the FHA home loan is that buyers using the program are much more likely to see their loans through, since the requirements demand a certain level of financial solvency and creditworthiness. Additionally, it prevents many homebuyers from getting homes that they cannot afford, since the interest rate is a fixed rate, and the mortgage is usually a traditional mortgage. No artificially tinkering with the debt-to-income ratio by giving a loan with a teaser rate, or an interest only loan.

While the new FHA rules are unlikely to help those facing foreclosure, they should help those buying a new home, especially first time homebuyers in high priced real estate markets.

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Mortgage Relief Act, FHA home loan program

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