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