14 Jul 08 FHA Mortgage Insurance Updates… Will this Increase Your Monthly Payment?

It’s July 14^th 2008 and starting today you will see some updates to FHA Mortgage Insurance. (Risk based Premiums)

This should have an interesting impact on the Real Estate Market because for the first time there will be a sliding scale for those with less that perfect credit. If you have less than perfect credit you will now have an increase in monthly payment and an increase in your closing costs!

Here are some of the FHA changes:

Upfront Mortgage Insurance will be increased from the current 1.5% of the loan amount to 2.25% for “high risk” or bad credit borrowers.
Yearly Mortgage Insurance will also increase from .50 to .55 coverage.
Middle Credit scores, of the three credit bureas, will be used to determine credit worthyness.

Translation:

Upfront Mortgage Insurance is paid at the time of closing and is usually wrapped into the loan amount. A higher amount here will only increase mortgage payments because it is financed into the loan in most cases.
Yearly Mortgage Insurance increases will increase monthly payments for every buyer looking to achieve.
Drop the high and low score leaving the middle score of the lowest credit scoring person in the pair buying a home.

This may not seem like much but the closing costs were already higher than average with an FHA loan, now it will only get worse. Not to mention the increase in payments on the loan and on the monthly mortgage insurance payment.

This minor change could price some people out of the Real Estate Market, but it will add some stability to FHA loans moving forward, generating another income stream that will help the mortgage business get its’ feet back on the ground.

As always, I am here to help. You may contact me via my BLOG at www.thelanegroup.blogspot.com or email brent@brentlane.net

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July 8, 2008 -- FHA Mortgage Insurance Changes Just Made This Mortgage Over Priced!
September 25, 2008 -- Buy and Bail and FHA’s Response
September 15, 2008 -- Buy and Bail: Making The Rule Work For You. Part II
July 31, 2008 -- FHA Loans: Down Payment Assistance Programs

Tags: closing costs, fha, fha mortgage insurance, FHA Mortgage Insurance Update

Filed in Real Estate

Reader's Comments

Parrot Bluetooth (1 comments.) | 15 Jul 2008 1:42 am
Yes this comes as a bad news for the low credit people indeed as this new updation will increase their monthly payments with the increasingly upfront mortgage insurance. Also there can be a slow down in the real estate market too! Your blog is very informative and this has compelled me to bookmark it: http://del.icio.us/britneyvaughan
John Cobb (2 comments.) | 19 Jul 2008 10:09 am
I thought that if you have upfront mortgage insurance then you don’t have a yearly or monthly mortgage insurance…..
Brent Lane - Guest Blogger (5 comments.) | 20 Jul 2008 7:35 pm
Hi John!

Unfortunately FHA Mortgage Insurance doesn’t work that way, you have both Upfront Mortgage Insurance and “Yearly” Mortgage Insurance or monthly payments!

THIS IS WHY FHA LOANS HOLD THE TITLE FOR THE MOST EXPENSIVE MORTGAGE TO GET FROM A CLOSING COSTS STANDPOINT.
RonOrr.com (2 comments.) | 21 Jul 2008 8:20 pm
FHA mortgage are easier for those with lower credit score in this current market, that is the one good thing.
Jennifer Hart (2 comments.) | 23 Jul 2008 7:47 am
Thanks for the information. Reading your blog has incuraged me to take a closer look at FHA loans. I have clients who have applied for an FHA loan and now I’m wondering if they should look at a conventional loan vs. FHA.
marc from hypothèque québec (2 comments.) | 16 Nov 2008 1:14 pm
Great information here.

“Upfront Mortgage Insurance will be increased from the current 1.5% of the loan amount to 2.25% for “high risk” or bad credit borrowers.”

Didnt know this.
Insurance man (1 comments.) | 22 Mar 2009 7:39 am
There is obviously a lot to know about this. I think you made some good points in Features also.
Keep working ,great job!
saidi (1 comments.) | 24 Apr 2009 8:05 am
Whatever your budget, car insurances is something you don’t want to waste an extra dime on. But having some form of car insurances is compulsory in all states, except for New Hampshire and Wisconsin. Car insurances are required in order to license a vehicle.
Daarvin (1 comments.) | 02 Jun 2009 5:57 am
Mortgage insurance allows a borrower to purchase a home with a down payment as low as 3 to 5% of the purchase price-even less for qualified borrowers-instead of the usual 20% down payment lenders normally require. Insurance premiums are paid by the borrower.
ick from Ntaux hypotheque | 16 Jun 2009 4:09 am
I am not familiar yet with this Mortgage insurance as I'm only new in the insurance industry. Surely, this topic and all the comments will help me to understand about mortgage insurance. I really appreciate it. Thanks!