On October 4, 2010 FHA is changing the mortgage insurance structure which will result in borrowers qualifying for less.
All FHA case numbers will be affected.
The changes include:
-The current up front mortgage insurance premium will be reduced from 2.25% of the loan amount to 1%. Sounds good right? Not so fast!
The monthly mortgage insurance for terms greater than 15 years:
LTV's <= 95% will increase the monthly fee from .5 to .85
LTV's > 95% will increase the monthly fee from .55 to .9
An example of how this will affect borrowers:
$400k loan amount under the old program at 5%:
3.5% down = $14,000
Upfront MIP = $8685
Total loan amount = $392,685
Total loan payment = $2108
Monthly MI = $180
Insurance = $60
Property Taxes = $417
Total payment = $2765
$400k loan amount under new program at 5%:
3.5% down = $14,000
Upfront MIP = $3840
Total loan amount= $387,840
Total loan payment = $2082
Monthly MI =$291
Insurance = $60
Property Taxes = $417
Total payment = $2850 or $85 MORE a month than the previous plan.
Granted this isn’t the end of the world but for those borrowers on the edge this will have an impact and cause pre-approvals to be adjusted downward.
Send this blog to your clients and let them know FHA loans are going to get a little more expensive soon and now might be the best time to buy their new home.
Michael Regan (NMLS #275695) specializes in Marin, Sonoma, and Napa counties. You can reach him at 415-672-2499 or online at www.TheReganTeam.com
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Copyright © 2012 The Regan Team Home Loan Group. All Rights Reserved.
Glad you are getting the word out. I hope it helps some of our buyers on the fense to jump off and move now.