Zero down payment FHA mortgage proposed

As part of President Bush's ongoing effort to help American families achieve the dream of homeownership, Federal Housing Commissioner John C. Weicher in January announced that the Department of Housing and Urban Development is proposing to offer a zero down payment mortgage.

This action would help remove a common barrier facing first-time home buyers the lack of funds for a down payment on a mortgage.

Speaking at the National Association of Home Builders' annual convention, Weicher indicated that the proposal, part of HUD's Fiscal Year 2005 budget request, would eliminate the statutory requirement of a minimum 3 percent down payment for FHA-insured, single-family mortgages for first-time home buyers.

"Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson in a press release. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."

Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 home buyers in the first year alone.

"This initiative would not only address a major hurdle to homeownership and allow many renters to afford their own home, it would help these families build wealth and become true stakeholders in their communities," said Weicher. "In addition, it would help spur the production of new housing in this country."

For those who choose to participate in the zero down payment program, HUD would charge a modestly higher insurance premium, which would be phased down over several years, and HUD would also require families to undergo prepurchase housing counseling.