The Federal Housing Administration increased its down payment requirement this year from 3 percent to 3.5 percent and the economic stimulus package singed into law in February allows the Department of Housing and Urban Development to temporarily increase its maximum loan limits.
The mortgage insurance that's part of FHA loans makes them more expensive than conventional loans, the price people must pay who would otherwise not get any financing. That helps first-time buyers and people with less than-stellar credit.
In insuring loans against default, FHA requires 1.75 percent of the purchase price, which is included in the loan amount and typically 0.5 percent a year on the remaining balance. the insurance premiums can be dropped when the amount owed is less than 80 percent of the value of the home.
In some cities and counties, FHA borrowers can use programs that eliminate the need for a down payment by offering a second mortgage. Usually no payments are required on the second mortgage until the house is sold. The public agencies offering these programs have their own eligibility rules that are independent of FHA. Generally the only zero-payment loans are VA and USDA loans in rural counties.
FHA will accept lower credit scores that are acceptable on conventional loans. FHA will forgive a bankruptcy after only two years and a foreclosure after three years.
According to HUD, the new loans limits for single-family homes are $327,500 in Pittsburgh region, $420,000 in the Philadelphia area, $402,00 in the Allentown area, $271,050 in the Scranton area and $271,050 in Harrisburg