Keeping up to date- New FHA down payment requirements

According to Mortgagge Letter 2008-23 HUD

We've all been waiting for this because new loan amount calculations were "supposed" to be effective 10-1-08, and thank goodness they're not. They WILL be effective January 2009 so get ready. I've never actually seen HUD really and truly "simplify" anything, let alone the loan amount calculations. They've actually done it this time!

The bad news is that the new down payment increased to 3.5% - as in 96.5% LTV. Flat out. No more borrowing against closing costs, no tiered LTVs, no convoluted calculations using cash investment. It's just like all of the rest of the LTV and down payment calculations in the real world.

And then, the refinance calculations are a shocker!

1. • Maximum Loan Amount Changes - Did you notice that the whole thing is effective the same date as the new maximum loan amounts? With all of the changes going on, it's nice they've waited on this.
   • HUD's Mortgagee Letter - Effective with case numbers on or after 1-1-2009, the maximum LTV is 96.5% LTV for all purchase transactions. Plain and simple.
   • Source of Funds for Down - Unchanged. The downpayment can't come from the seller, builder, lender, or any party to the transaction - the same as always.
   • Seller Concessions - Seller financing concessions are the same as it's always been.
   • Maximum LTV with UFMIP - the only time the 100% comes into play is with refinances. On a purchase, 96.5% plus UFMIP never exceeds 100%.
   • Cash-out Refinance Calculations - This one's also easy, nothing changed.
   • Refinance Calculations - Add the indebtedness plus the UFMIP. If the amount is less than 100% LTV, it becomes the new loan amount. If not, drop the loan amount to 100%. (Of course, you must make sure you're under the legal loan amount limits.)
     
     With a 1.75% UFMIP, this results in LTVs (before UFMIP) of approximately 98.25%!
     
     No tiered LTVs at all. They're all gone after 1-1-09 (case numbers).
   • Other than Cash Out - Besides cash-out, there are No Cash-out refinances, FHASecure refinances, and Streamlined refinances.
     
     At this point, the new calculations will apply to all of them. Unless, of course, HUD changes or further clarifies the rules before 1-1-09.
     
     (Note that FHASecure is scheduled to end 12-31-08, but I just don't believe it. The program is doing increasingly well and for political reasons alone, I bet it will be extended.)