Its official: FHA was just given authority to change the amount charged to borrowers for both the Up Front and the Annual Mortgage Insurance premiums...and change them they did.
The new premium amounts will be effective on all FHA case numbers assigned on or after October 4, 2010 – so borrowers that already have an FHA transaction in process won't be impacted, but new FHA clients who come into process on or after October 4th will be subject to the new guidelines.
Here's what you need to know:
The Up Front Mortgage Insurance premium is now 1.0 % for all standard FHA programs, including on purchased money mortgages. This is a significant change from the 2.25% Up Front Mortgage Insurance premium typically in place on FHA 30 year Fixed Rate transactions.
... But don't break out the party hats just yet ... the Annual Mortgage Insurance premium is now .90% for LTV's greater than 95% on 30 year loans...and this is also a significant change from the .55% we've been accustomed to using when calculating the monthly payment. Based on a loan amount of $250,000, that is an increase of $72.92 a month!
There are different annual premium amounts for lower loan values and for 15 year terms, so call Brandon Byrd with Loan South Mortgage for more details if needed (see contact info below). And by the way, FHA now has the authority to raise the Annual Mortgage Insurance premium “at will”...up to 1.55%...so Brandon will be keeping closely tuned to any changes and will be sure to keep you informed.
So, what does this all mean for you, the borrower?
Right now you have to pay a bigger upfront premium and a smaller monthly premium. Under the new guidelines you will pay less upfront but more each month and it will take roughly 43 months before the bigger monthly premiums outweigh the lower up-front premium.
The bottom line is if you think you will be in your home for less than 43 months it could be worthwhile to wait until after October 4th to obtain FHA financing. Otherwise it would be cheaper in the long run to apply for your loan before October 4th.
If you have any other questions about how these changes will impact you, call or email Brandon today!
Brandon Byrd: Loan South Mortgage (404) 915-8262
BByrd@loansouth.com
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