A new bill has been drafted to raise the minimum down payment for FHA loans. This bill written by the Republicans on the House Financial Services Committee will increase the down payment to 5 percent as well as cut FHA loan limits in many markets. Currently, home owners who take out FHA loans are required to have a down payment of 3.5 percent. The reasoning behind this new bill says it is to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee. The draft legislation also calls for lowering FHA loan limits in several areas.
In addition to the increased down payment, the maximum size of FHA loans in expensive areas of the country is set to drop to $625,500 on Oct. 1, which is a decrease of almost $105,000. In less expensive areas, the limit may drop to $271,050. The draft bill wants to drop the limits to almost 125 percent of a county’s median home price, Dow Jones reports.