FHA Home Loans in 2009

Reader Question: Will FHA loans be available in 2009?

The FHA (Federal Housing Administration) has been helping home buyers and homeowners since 1934. A FHA home loan is one that is insured by the federal government, rather than a private insurer.

I can assume that the FHA will continue to insure mortgage loans in 2009. But recently, their focus seems to be on stemming the tide of foreclosures. They have launched some refinancing programs to help struggling homeowners refinance into more affordable fixed-rate mortgages.

While it's unlikely the FHA home loan would be discontinued in 2009, there have been some changes to the program. These changes include:

• Lowering the maximum amount from $729,750 to $625,500, effective Jan. 1, 2009
• Raising the minimum down payment from 3 percent to 3.5 percent
• A ban on seller and non-profit funded down-payment assistance

In fact, there has been a huge increase in the amount of FHA home loan applications this year, due to the restrictions placed by most lenders and private insurers who have suffered the affects of the sub-prime mortgage meltdown. Many of them require a down payment of at least 10% and rarely less than 20%. So the popularity of FHA mortgage loans will probably continue to rise in 2009 ... and beyond.