FHAs commissioner has indicated that the maximum loan-to-value on government-insured mortgages could increase later this year.
Borrowers may soon be able to take advantage of the Zero Down Payment mortgage -- in which downpayment and closing costs can be rolled over onto the life of the loan, said Federal Housing Commissioner John C. Weicher in a teleconference Monday from Las Vegas, Nev. He was attending the National Association of Home Builders' annual convention.
If approved by Congress, the program can possibly be in effect by Oct. 1, 2004, Weicher said.
Applicants participating in the Zero Down Payment program must attend pre-purchase homeownership counseling and be able to meet FHA qualifications, according to FHAs top man, and they must also be prepared to pay a premium and interest rate higher than standard FHA loans.
The premium would be 2.25% of the loan amount, instead of 1.5%, the commissioner said. The interest rate would be 75 basis points annually higher than the base rate for the first five years, which after that would revert to FHA's standard 50 basis point premium.
The Zero Down Payment, which allows upfront costs to be paid over the life of the loan, compliments with the American Dream Downpayment Act passed last year, which grants downpayments for customers.
The program will help 150,000 families acquire a home in its first year by eliminating the "single biggest obstacle" for first-time homebuyers -- the lack of funds for a downpayment, said the commissioner.
FHA recently bumped its maximum insured mortgage amount to $290,000.