Today I ask you to please don’t shoot the messenger, but there are a couple of big changes coming to FHA.
First, the monthly mortgage insurance rate is going up from 1.25% to 1.35%. This change takes place for loans that are submitted to the FHA system on April 1st or after. For a buyer on a $100,000 loan it will make a $7.97 increase in their payment and a $15.93 increase for a $200,000 loan.
But here’s the BIG one….
For all loans beginning June 3rd, for your standard 30 year, 3.5% down FHA loan, monthly mortgage insurance is on the loan for the life of the FHA loan! Yes, you read that correctly. The old rule was that MI was on a loan for a minimum of 5 years or up to a point where the loan reached a 78% loan to value ratio, whichever came last. Now it’s on for the full 30 years or until the borrower pays off the loan! For a borrower at $200,000 that’s an additional $199 per month for the full 30 years! The only reprieve from that is if a borrower puts down 10% or more, the mortgage insurance is mandatory for a minimum of 11 years or a 78% loan to value, whichever comes last.
Want other options? Here’s a few other things to consider: VA loans and Native American loans do not have mortgage insurance at all. USDA has very low mortgage insurance rates ( 1 full point lower than FHA). Conventional mortgage insurance is becoming more affordable and less restrictive than just a couple of years ago.
The sky is not totally falling. Loans will still happen after April 1st and June 3rd, it will just be more expensive. Now is the time to act! Please fill out the online mortgage application and get started today finding your dream home!