With the continued housing crisis and economic struggles facing the country, mortgages continue to be difficult to obtain. With most of today's borrowers using FHA, the Federal Housing Administration, even they are changing the way to do business. Recent changes have been announced which will make it a little more expensive to get an FHA mortgage. These changes take effect October 4, 2010.

The down payment required for an FHA mortgage is currently 3.5% of the sales price. This requirement is changing and will be based on a borrower's credit score. Say goodbye to the days of no required credit score for an FHA loan. For credit scores from 500 to 579, FHA will now require a 10% down payment. For a credit score of 580 and above, the down payment will remain at 3.5%. For credit scores below 500, FHA will no longer approve a mortgage.

The upfront FHA mortgage insurance premium is being reduced from 2.25% to 1.00% of the loan amount. This UFMIP is still allowed to be added to the loan amount to be mortgaged. In addition, the FHA mortgage insurance premium which is paid monthly is being increased to .95% for loan to values above 95% and .90% for loan to values below 95%. This increase will nearly double the current monthly FHA MIP being paid today.

At the current time, seller concessions that are allowed is still set at 6% but FHA has proposed reducing that to 3%. These seller concessions can be used for closing costs. In addition, FHA is still allowing gifts and grants to be used for the required down payment. The current interest rates for FHA mortgages are still very competitive and very close to the interest rates for conventional loans.

No matter what changes take place, FHA is still the most popular type mortgage to obtain in today's housing market. Although they require more documentation, they are still easier to be approved for than a conventional mortgage where lending guidelines have become stricter. As the mortgage industry keeps evolving, more changes should be expected to be made for every type of mortgage, including conventional loans, FHA, VA and jumbo loans.