08 Jul 08 
FHA Mortgage Insurance Changes Just Made This Mortgage Over Priced!
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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
