FHA mortgage insurance changes are due to take effect on October 4th, 2010. When I first wrote about the increase in monthly, and decrease in up front mortgage insurance premiums, the changes were due to take effect on September 7th, 2010.
The Top 3 things you need to know:
1. The upfront mortgage insurance premium will be DECREASED 2.25% of the loan amount to 1%. On a $300,000 loan this would reduce your loan amount (if you finance the up front mortgage insurance) from $296,013 to $292,395 – this saves you $3,618!
2. The monthly mortgage insurance premium will be INCREASED from .55% to .90%. Given the same scenario above on a $300,000 loan this would increase your monthly payment from $134 to $219.30. This will hit the old pocket book for a whopping $85.30 more every month. Ouch!
FHA mortgage insurance is required to be paid for a minimum of 5 years which means that the upfront savings of $3,618 is shadowed by a minimum cost increase of $5,117 because of the $85.30 increase in the monthly payment.
3. These changes will take effect “on any FHA case number opened on or after October 4, 2010” which means you have to acquire the FHA case number before October 4th to avoid the new higher monthly mortgage insurance rates.
As with just about everything in life there is a downside and an upside to changes.
The downside is the higher monthly mortgage insurance, the upside is that this FHA program is going to be around for a long time.
FHA is one of the best programs around for first time homebuyers due to the lowdown payment requirement of 3.5% of the purchase price.
In short the changes that add a slight bit of expense to this program should not detract from the fact that this program offers huge benefits to buyers.
If you are considering an FHA loan to purchase your home, be sure to look into the CalHFA Government first time home buyer loan recently announced.
If you have any questions about using an FHA loan to purchase or refinance your home, please leave me a comment below, call/text or email me