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Revised Down payment and Maximum Mortgage Requirements for FHA Loans
Effective January 1, 2009

The Housing and Economic Recovery Act of 2008 (HERA) revised the National Housing Act to include the following provisions:

FHA Reform: including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program.

The down payment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is January 1, 2009, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

Homebuyer Tax Credit: a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan). View details

Seller-funded down payment assistance programs: codifies existing FHA proposal to prohibit the use of down payment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.

VA loan limits: temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

Risk-based pricing: puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.

Mortgage Revenue Bond Authority: authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

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