We are in uncharted waters when it comes to FHA financing – and in my experience, uncharted waters means anything can happen.

But you may have heard that recently the FHA insurance fund has dropped below the Congressionally mandated 2% and there is a lot of discussion about whether or not FHA is going to need a bailout.

Will FHA need a bailout?

I don’t have enough information to know for sure – so I won’t even take the time to speculate. The only thing that is really clear to me is that there are probably quite a few people who work at HUD burning the midnight oil trying to come up with some possible solutions to the problem of FHA being under-capitalized.

Which means I suspect more changes are coming to the FHA financing programs – and I will give you a hint — I suspect that none of them will make it any easier to get an FHA loan.

The LA Times did a nice job of outlining just a few possibilities:

* Higher down payments. FHA’s current minimum cash down payment is 3.5%. On a $200,000 house, a buyer can bring just $7,000 to the table, aside from closing costs.

* Higher mortgage insurance premiums. FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount. Most borrowers roll that into their loan and finance it. The FHA also charges an annual premium, paid in monthly installments, of either 0.5% or 0.55%, depending on the down payment. To rebuild reserves, FHA could tweak one or both premiums to yield higher revenue. It could raise the upfront premium as high as the statutory maximum of 2.25%. It could also raise the annual fee, but the total premium could not exceed 3% under current congressional limits.

* Cutting home-seller “concessions” to borrowers’ loan costs. One of the big attractions of FHA financing has been the agency’s liberal allowance for seller contributions to borrowers to offset settlement and loan-related fees. The current FHA limit is 6% of the house price, which critics believe to be excessive. They say the policy allows financially marginal borrowers to buy houses they shouldn’t, raising FHA’s exposure to losses. Pinto wants Congress to order FHA to reduce maximum concessions to 2%.

* Toughening credit standards. In the mortgage market, FHA is by far the most lenient and flexible player when it comes to evaluating applicants’ creditworthiness. It does not have a minimum credit score, though it permits lenders to impose their own FICO score minimums. FHA also has been far more tolerant of credit history peccadilloes than Fannie Mae or Freddie Mac.

Is the day coming where you will need to have a 10% down payment in order to qualify for an FHA mortgage?

I don’t know.

We are in uncharted waters.

Which means anything is possible.

For example: did you know that many lenders now require a mid-credit score of 640 for an FHA loan?

Stay tuned, more changes coming.