FHA Zero-Down Loans Receive a Thumbs-Up From Builders
A bipartisan legislative proposal establishing a pilot program for Federal Housing Administration (FHA) insurance of zero downpayment mortgages would significantly increase homeownership opportunities for the nation’s working families, NAHB told Congress on June 30.
Appearing before the House Subcommittee on Housing and Community Opportunity, NAHB President David Wilson testified in support of H.R. 3043, the “Zero Downpayment Pilot Program Act of 2005,” which was introduced by Reps. Patrick Tiberi (R-Ohio) and David Scott (D-Ga.).
“This legislation continues a long tradition of innovation at the FHA by addressing a primary obstacle preventing many minority and low- and moderate-income families from becoming home owners — the lack of funds necessary for a downpayment,” said Wilson.
Designed to be financially self-supporting while building a record of success, the pilot program established by the bill would enable the FHA to insure up to 50,000 zero downpayment mortgages for first-time home buyers.
Home buyers would be required to pay a 2.25% mortgage insurance premium (MIP) for the loan upfront, compared to the 1.5% that is required for an FHA single-family loan with a 3% downpayment, and an annual MIP of 75 instead of 50 basis points for the first five years of the loan.
Monthly mortgage payments would be slightly higher than for a standard FHA-insured mortgage, and home buyer counseling would be mandatory for all buyers who participate in the program.
“This prudent approach would allow the FHA to insure the no-downpayment loans in a safe and sound manner without harm to its insurance funds,” said Wilson.
To assure that the legislation reaches as many households as possible, H.R. 3043 would also apply to condominiums and cooperatives.
“In many communities across the nation, these homeownership alternatives are more within the financial reach of low- and moderate-income families than single-family detached homes,” said Wilson. “Condos and co-ops can provide the same wealth-building benefits for families and also bring stability to neighborhoods.”
Noting that members of NAHB work daily with families who are struggling to join the ranks of the nation’s home owners, Wilson told lawmakers that H.R. 3043 would help to “close the housing affordability gap and expand the number of those who can share in the American dream of owning their own home.”
To read the legislation, click here and enter H.R. 3043 in the box at the upper left.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
Photo by Herman Farrer