First New FHA Mortgage Insurance Premium Change to Happen April 5, 2010

Yesterday, I wrote about the major FHA fee changes that could be coming up.

Today, the mortgagee letter went out to FHA approved banks, stating that the upfront mortgage insurance premiums collected will be 2.25% instead of the 1.75% they are now. I would like thank Michael Johnston from Carrollton Mortgage Services, Inc. for sharing the mortgagee letter with me.

The closing costs assistance I discussed yesterday is not addressed in this letter, so I do not know when that may come into play.

This change in the MIP goes into effect for any FHA loans for which the case number is assigned on or after April 5, 2010.

So if you are a qualifying buyer for an FHA loan and want a lower up front mortgage insurance premium of 1.75%, you need to get under contract very soon!

 

To reach Michael Johnston, Assistant Vice President, Carrollton Mortgage Services, Inc.,  E-mail: mjohnston@carrolltonbank.com , Office: 410-561-8477 X 106, Cell: 410-627-1921

FHA Announces Major Changes in Loan Fees

The FHA mortgage, a very popular loan option for buyers, has announced the likelihood of higher fees for borrowers wishing to utilize the government backed loans to buy houses.

The Wall Street Journal broke the news late last night in their article about the FHA fees increasing. Thank you to Dan Plunkett of Prosperity Mortgage for sending the WSJ article above, and making me aware of these possible major changes to FHA financing.

The changes have not gone in effect yet, as it isn’t official, and that date is yet to be announced.

Here are the major changes that will affect FHA loan borrowers:

• Seller contribution to Buyer’s closing costs will be reduced to 3% of the purchase price of the house. (Sellers currently are allowed to contribute up 6%).
• The upfront Mortgage Insurance Premium (MIP) required on all FHA loans will be raised to 2.25% of the loan amount. (It currently sits at 1.75%).
• The monthly Mortgage Insurance Premium (MIP) will also increase, though that amount has not been released yet.

The good news is that the downpayment was left alone at 3.5%, as there were discussions of raising that to 5%, making the loans harder for buyers to utilize, with the inability to get more money from the seller for closing cost help.

If this goes through as planned, this is going to make getting an FHA loan much more difficult for many Americans, because the closing cost help from the seller can make the determination as to whether a buyer has enough cash to close at settlement. I have experienced a number of buyers who have gotten more than 3% in closing cost help from the seller, and this would make the houses unattainable for those buyers.

I am worried about what this may do to the housing economy, as FHA loans have become a very popular program due to the low downpayment option and ability of the seller to contribute a decent % of the purchase price back to the buyer to make the house affordable for them.

I will keep you updated as this develops further.

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