It’s official. As many of you know by now FHA is changing their mortgage insurance guidelines in October.
What does that mean for you as a buyer?
If you already have a loan approval but have not found a home, your payments will most likely increase and your existing approval may no longer qualify for the homes you are putting offers on.
Here is the reason:
Even though you’re upfront mortgage insurance premium is decreasing to 1% from the current 2.25%, the monthly mortgage insurance will be increasing from .55% to .90%.
The concern is that it will decrease your maximum purchasing power.
For example; if you are currently purchasing a home for $400,000 your monthly mortgage insurance is $175.84 a month.
If you buy the same home next month the payment will increase to $287.73 a month. Of course the difference will depend on the loan amount but you can see how this will change things.
Another announcement from the major banks is that you will now need a minimum 640 credit score.
If you do not have an open escrow as of today (October 1st) you need to contact your lender.
Ask if you are still qualified for an FHA loan and what changes will affect your current loan approval.