On April 1st, FHA annual mortgage insurance increases again making mortgage payments of first time and low down payment home buyers a little more expensive.
On June 3rd, 2013, FHA annual mortgage insurance will remain for the entire term of the loan for all 30 year fixed rate mortgages with a loan to value over 90%.
Here is the complete breakdown of the new MIP changes based on loan term and loan to value:
|<15 yrs||<78||5 years||11 years|
|<15 yrs||>78 – 90||Cancelled at 78% LTV||11 years|
|<15 yrs||>90||Cancelled at 78% LTV||Loan term|
|>15 yrs||<78||5 years||11 years|
|>15 yrs||>78 – 90||Cancelled at 78% LTV & 5 yrs||11 years|
|>15 yrs||>90||Cancelled at 78% LTV & 5 yrs||Loan term|
FHA is Not the Only Option
Conventional financing is in many ways a much better option for home buyers or home owners with a high loan to value. Did you know that conventional financing offers these options?
Purchase a home with as little as 3% down payment – If you are buying a primary residence, conventional financing allows for as little as 3% down payment using Private Mortgage Insurance, which will save you thousands of dollars in closing costs and monthly payments. There is a pretty significant drop in costs if you can scrape up another 2% down for a loan to value of 95%, be sure to ask your loan officer for a comparison.
Refinance a home up to 97% loan to value – Conventional loans allow homeowners to refinance an owner occupied home up to 97% loan to value. Same program as a 3% down payment purchase.
Lender paid mortgage insurance – Conventional programs also allow the lender to pay the mortgage insurance for a borrower. This results in a slightly higher interest rate so do the math. This is a fantastic option for those buyers or owners that want to convert mortgage insurance into tax deductible mortgage interest!
Community Access – This program offers significantly reduced mortgage insurance rates, 3% down payment (or loan to value on refinance) and reduced closing costs. The catch is, there is an income limit of 140% of the area median income for where you buy. These limits are very generous and I rarely see this being an issue.