FHA Mortgage Insurance Reserve Improves

FHA insurance reserve solvency has improved which will hopefully quiet those demanding an increase to the FHA minimum down payment of 3.5% 

The current FHA mortgage insurance fund represents .5% of all loans insured by FHA.  Congressional mandate requires the fund to be 2% of all insured loans.  If the loan loss reserve were to fall below 0, the Treasury would have to infuse cash into the FHA mortgage insurance pool.  Recent changes to FHA mortgage insurance premium should further strengthen the FHA reserves.  As of October, FHA lowered their upfront premium to 1% of the loan amount but raised its monthly premium from .55% to .90%.  The net result of these changes is an overall increase in the FHA mortgage insurance premium.  The current foreof improving home prices should also help stabilize and increase the FHA loan loss reserve fund.

With FHA minimum credit scores now at 640, FHA remains the primary mortgage of choice. 

On conventional loans, PMI companies are still requiring a minimum of 680 on the lowest middle score and they will not approve a loan where the total debt ratio exceeds 41% no matter what the LTV per MGIC.