The Housing and Economic Recovery Act of 2008 & FHA

Wednesday, September 17, 2008 - By Gate Arty

The Housing and Economic Recovery Act of 2008 (HERA) is beginning to be implemented by FHA.  As of October 1, 2008 HERA will mandate FHA to require a minimum of 3.5% in down payment, up from the current 2.25% down payment.  Accordingly, mortgages with new FHA case numbers assigned on or after January 1, 2009, will require a down payment of 3.5% of the lesser of the appraised value or purchase price, PLUS ANY CLOSING COSTS TO BE PAID BY THE BORROWER.  The seller will still be able to pay up to 6% of the sale price towards the borrowers closing costs and prepaids.  FHA does allow gifts from relatives and government down payment and/or closing cost assistance (Keystone/SHIP), but no longer allows seller-funded down payment assistance (Nehemiah and Ameridream) as of October 1, 2008.

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