14 Jul 08 FHA Mortgage Insurance Updates… Will this Increase Your Monthly Payment?
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It’s July 14th 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
Tags: closing costs, fha, fha mortgage insurance, FHA Mortgage Insurance Update
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
I thought that if you have upfront mortgage insurance then you don’t have a yearly or monthly mortgage insurance…..
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.
FHA mortgage are easier for those with lower credit score in this current market, that is the one good thing.
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.