FHA CHANGES! How It Affects You!
Beginning April 1st, FHA is changing what it charges for its beginning annual rate for monthly mortgage insurance. Mortgage insurance is required for most and soon to be all FHA loans. What exactly is the current change that impacts most FHA loans? Currently, the beginning annual rate for monthly mortgage insurance charged is 1.25% of the base loan amount. Now it’s going to be 1.35%. Not a huge change, really. On an average, it will only increase your payment $8-10 a month.
Why is FHA making this change? For one thing it will serve to strengthen FHA lending in general. This increase will fortify the Mutual Mortgage Insurance Fund. Why do you care? Well if the fund weren’t fortified, then FHA loans could go away in general. This fund offsets the FHA’s risk for offering loans that only require a 3.5% down payment. If FHA loans went away, that would be a very bad thing. The FHA loan is a perfect solution for many customer sand will continue to be so. Take your typical, straight up FHA loan- most lenders require a 640 credit score. The credit score net is cast a bit wider for FHA loans than for other product types offer by lenders. For example, income qualifying first time home buyers in TN can obtain home ownership with only a 620 score! The other nice thing about an FHA loan? The debt to income ratio is a bit more lenient than you find in the conventional lending arena…typically. The FHA loan is a great product and a perfect fit for many home buyers. The discussed change, while at first may seem negative, is actually a very positive change because it allows these loans to keep existing.
There is a second phase to the FHA change that will be instituted for loans logged into its system effective 6/3/13. At this time the FHA 15 year loans will no longer be exempt from annual mortgage insurance.
In a nutshell, if you still want to “play” with FHA, you have to “pay.”