08 Jul 08 
FHA Mortgage Insurance Changes Just Made This Mortgage Over Priced!
If you're new here, you may want to subscribe to New Homes Section's Blog. Thanks for visiting!
I always tell my clients, “FHA Mortgages are the most expensive loans to close when it comes to closing costs!”
The reason for this is that FHA has mandatory Mortgage Insurance!
FHA loans were always known for their ability to help those buyers and homeowners with low credit scores to qualify for a mortgage. The new changes will still allow for this but will make it more expensive.
This Mortgage Insurance comes in two forms:
- Up from Mortgage Insurance Premium
- Monthly Mortgage Insurance (or yearly divided up monthly)
Mortgage Insurance Premium-
This is currently running 1.5% of the mortgage balance and is typically financed on top of the max 97.15% loan to value guideline. The new FHA Mortgage rules will change this percentage to credit risk-based formula that is common for all other forms of mortgage insurance.
NEW RULE: FHA Mortgage Insurance Premiums up to 2.25% of the loan balance added to closing costs (but if can be financed)’
Monthly Mortgage Insurance-
Following the same formula that the premiums used we will see the new monthly “factors” as we call them will increase based upon your credit score. Currently we use a .005% yearly factor divided by 12 months to calculate monthly mortgage insurance.
NEW RULE: This “factor” will increase to .0055% in most instances but for those with below average credit will have it increased to over .0125%. That is a healthy increase of 2.5 times its current amount.
I guess if you have below average credit you better learn some credit secrets that will have a fast and efficient increase in your credit scores.
Don’t go blindly into a FHA mortgage just because you qualify because you can’t decrease your Mortgage Insurance after you close unless you are willing to incur the cost of a refinance.
As always, I am here to help you understand your mortgage and the process. Leave comments below and contact me via my BLOG at http://www.thelanegroup.blogspot.com for additional questions or scenarios.
What you don’t know will cost you money!
Brent Lane
The Lane Group
Tags: brent lane, closing costs, fha, fha loan, fha mortgage, fha mortgage insurance, insurance premium, mortgage insurance, the lane group
Reader's Comments
Leave a Comment
Is the fha going to do a 120%-130% ltv
I understand that FHA mortgages may have become more expensive but what is the alternative for someone that does not have a large down payment or the best credit? In Massachusetts anyways, these loans have become incredibly popular.
It looks like credit scores are becoming more and more important. Before is seemed like if you had a 650 you were good to go. Now with more emphasis on credit scores we are personally paying more attention to our financial dealing and how they will relate to our credit score.
Hi Vicki-
FHA is currently doing loans up to that CLTV but I haven’t heard them doing them that high with one loan. For those not know what CLTV it’s cumulative Loan-to-Value or when you have more than one loan on your property! This is good for those with upside down mortgages and coincidentally I cover that topic quite a bit on my personal blog so check it out!
Mr. KW Austin Real Estate!-
I have so much ammunition for articles relating to the new changes around credit score! NOW MORE THAN EVER CREDIT IS KING BECAUSE YOU CAN’T GET TO THE CASH WITHOUT IT! Ask your local LO about FNMA conforming credit changes! This is BIG NEWS and I will have a post out Monday or Tuesday about 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 [...]
This sounds like a bit of a scam to me. They are just trying to squeeze as much cash out of buyers as they can.
Bad credit cannot create a good impression on lenders. At the same time lenders hesitate to provide funds and disqualify their loan applications. But bad creditors with the help of No credit check loans can easily access loan amount. This scheme is meant to support the people when they confront financial disruption and rescue them from such disputes. All sorts of people like salaried persons, self-employed, venture owners, housewife, cultivators, professionals etc. can approach and approve the loan. They can access the amount that suits their income and repaying ability. Visit: http://www.loansx.co.uk/
This article is easy way for information of bad credit loans, who requires. It’s so easy, yet many people might face trouble and stress when they unable to find any way out to meet the demand of an emergency. At the time of this situation bad credit loans solve your financial problem, It is one of the fastest loans which deliver with in few hours. I applied some times ago and now I got it same day and I must want to share that sites which are providing very good and fast service here it is: http://www.ukfinanceworld.co.uk/