(Recasts with FHA announcement)
By Corbett B. Daly
WASHINGTON, Jan 19 (Reuters) – The U.S. Federal Housing Administration said on Tuesday it will raise the minimum down payment required to secure an FHA-backed mortgage for less creditworthy borrowers as part of a series of steps to shore up the agency’s finances.
The FHA said borrowers with credit rating scores below 580 would be required to make a down payment of at least 10 percent, while the rate for higher-ranked borrowers would stay at 3.5 percent.
It also said it would increase the up-front mortgage insurance premium, which is paid by the borrower when the loan is made, to 2.25 percent from 1.75 percent.
The moves will raise the cost of mortgages at a time the housing sector is trying to find its feet, but the agency said it was a prudent step to ensure its financial health and carry on its mission of supporting home ownership.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” FHA Commissioner David Stevens said in a statement.