What are the new changes to FHA home loans?

As of June 1st this year, major changes were made to the FHA home loan program and its Mortgage Insurance Premiums.  Any new FHA loan after the date is subject to higher rates on Mortgage Insurance Premiums and the duration of the MIP.

The FHA Mortgage Insurance Premium(MIP) consists of 2 parts, upfront MIP and a monthly MIP.  The rates now are 1.75% of the loan amount upfront and 1.35% per month on a 30 yr fixed rate loan amount and the monthly payment.  For example, a 30 yr fixed rate FHA Mortgage with 3.5% down payment, the numbers would look as follow:

Purchase price: $175,000-This is the average price in my market, Boise, Idaho.

3.5% down $6125,

Loan: $ 168,875

Upfront MIP, 1.75% $2955.31

Monthly MIP: 1.35%  $2279.81 per year or $189.968 per month.

As you can see, the FHA Mortgage Insurance can add a considerable amount to your monthly payment.

As if that wasn’t enough, the Mortgage Insurance is part of the loan for as loan as you have a FHA loan.  It used to drop off once you had paid your balance down to 78%.  Now the only way to drop MIP from your loan is to refinance out of the FHA loan or sell the property.

This will make conventional loans, with their 3% down payment much more attractive than a FHA Loan.

Any good loan officer will run the comparisons for a home buyer considering a FHA loan to make sure the client is getting the best possible loan at the lowest possible payment.

If you’re in the Boise, Idaho area and need a quote, give me a call.

 

 

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