The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of   2010, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price — and that didn’t change.

The new policies are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

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	Lenders will usually allow you to spend up to 28% of your total ("gross") monthly income to make mortgage payments. The table below shows how much 28% equals at various income levels. Different loan plans allow you to borrow more or less for the same monthly payment. Annual Income Gross Monthly Income Affordable Monthly Payment $15,000 $1,250 $350 $20,000 $1,667 $467 $25,000 $2,083 $483 $30,000 $2,500 $700 $35,000 $2,917 $817 $40,000 $3,333 $933 $45,000 $3,750 $1,050 $50,000 $4,167 $1,167 $55,000 $4,583 $1,283 $60,000 $5,000 $1,400 $65,000 $5,417 $1,517 $70,000 $5,833 $1,633 $75,000 $6,250 $1,750 Call us for a mortgage payment calculator. The calculator shows the monthly principal and interest payments for each size loan at current interest rates. We can show you how much house you can afford after figuring in the down payment, taxes and insurance. You might be surprised at how easily you can afford to buy.