It’s no secret that the Obama administration plans to slowly decrease the volume of FHA home mortgage insurance, but how will this affect buyers? It seems that we’re already seeing some changes. As of March, FHA insured, single family mortgage applications were down 30% compared to last year according to the FHA. Prospective homebuyers have sent in less than 35% as many applications. This may come as a shock given the FHA’s extreme popularity in year prior. Why are things shifting? For starters, the FHA has increased its premium charges for the second time in 6 months (effective April 18, 2011). This increase in premiums means that buyers will have higher monthly payments, which is difficult for buyers on tight budgets. This may even make purchasing out of reach for some prospective buyers. It’s especially difficult when private mortgage insurance companies competing with FHA are offering revamped conventional mortgage products—some of which may offer a good amount of monthly savings compared to the FHA. The recent changes to the FHA have some individuals concerned as they feel it is the last hope for those who do not have large sums of cash to purchase a home. Making it more difficult for those who would otherwise turn to the FHA to qualify is certainly not looking very positive for prospective buyers in this current housing market. One of the principals of D.C.-based Potomac Partners, a mortgage banking consulting firm, Brian Chappelle said on the subject, “FHA’s role was designed to be the first rung on the homeownership ladder. If you raise fees, increase down payments and lower mortgage limits, it would be a serious impediment for future buyers and the economy.” The concern for the FHA and homebuyers in general is largely due to the white paper released in February by the Obama administration, which called for housing reforms such as higher down payments—including higher down payments for FHA. Some speculate that the FHA may increase its down payment requirement from 3.5% to 5% in the near future. At the same time, FHA’s maximum loan amount may drop in October if Congress refuses to renew the economic-recovery-law ceilings—currently limited to $729,750.