Major changes to FHA loans!
If you are thinking about buying a home in the near future and obtaining an FHA loan, you better act fast. The costs and guidelines of FHA loans have continued to change over the past few years and are becoming a less desirable loan option for borrowers. The next wave of changes are major and really can add to the total cost of the loan to home owners.
Here is a list of the top 5 changes to FHA
- The annual mortgage insurance premium (MIP) for most new mortgages will increase by 10 basis points (.10 percent). Premiums on jumbo mortgages ($625K or higher) will increase by 5 basis points (.05 percent). New annual MIPs will range from 1.3% to 1.55%
- FHA will require borrowers to continue paying annual premiums for the life of their mortgage loans. This change will be effective on or after April 1, 2013.
- Lenders will have to manually underwrite loans for borrowers with a decision credit score below 620 and a total DTI ratio greater than 43%. This change will be effective on or after April 1, 2013.
- Down payment requirements for mortgages with original principle balances above $625K will be raised from 3.5% to 5%. (A federal register notice was published on Feb 6th. Comments are due March 8th.)
- Greater oversight will be required for borrowers who are trying to obtain a new FHA loan 3 years following a foreclosure.
Consider this, if you bought a home using FHA before April 1st and you made extra payments on your loan and one day you have at least 22% equity in your home, you can remove the mortgage insurance saving you around $200 a month. If you buy a home after April 1st you must pay the $200 a month for the full 30 years!!! That could cost you tens of thousands of dollars.
If you are looking at buying this year and planned on going FHA financing, you should consider buying before the April 1st deadline. You don’t have to be closed on a home by April 1st, but you must have a property identified by that date with an FHA case number assigned.
Call me at 801-683-9666 if you have any questions or would like me to assist you in buying a home in Utah.
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