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New bill would increase mandatory FHA mortgage down payment

(05/27/2011) If a bill recently proposed to the U.S. House of Representatives becomes law, consumers who want a home loan backed by the Federal Housing Administration will have to make a larger down payment.

Republicans recently discussed a bill at a House Financial Services subcommittee hearing that would increase the minimum down payment required for obtaining an FHA-backed home loan to 5%, up from the current rate of 3.5%. This measure was introduced to the proposal, which hasn't been formally introduced to the legislature, because the FHA has run low on funds due to the foreclosure crisis.

Consumers facing foreclosure may find that their home loans are more affordable after they refinance. By checking the latest online rate tables to find the best local mortgage rates, consumers can save as much as a few hundred dollars a month on their current home loans.

The National Association of Realtors is among those who would protest the bill, saying that if mandatory down payments rose to 5 percent, more than 300,000 consumers who would otherwise be able to obtain such a loan would be unable to afford doing so.