FHA Gives Home Buyers 1 Month

The Federal Housing Administration (FHA) is giving homeowners and buyers until October 4 to lock in a low monthly insurance premium, according to Gibran Nicholas, chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. “After October 4, the monthly insurance premiums on FHA loans will increase by over 63%.”

What does this mean for home buyers?A home buyer purchasing a $200,000 home using a $193,000 FHA mortgage before October 4 would pay an insurance premium of $88.46 per month. If the same home buyer waits until after October 4, the insurance premium would jump to $148.01. 

“In this example, the home buyer would lose $59.55 per month, or $7,146 over a 10-year timeframe,” Nicholas said. “Although the upfront mortgage insurance premium is going down after October 4, the real impact to the home buyer is actually a net increase in their out of pocket costs because the monthly premium is going up by 63%. Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket. On the other hand, the increase in the monthly premiums will be paid right out of the home buyer’s pocket with their mortgage payment each month.”

Ironically, home buyers who plan to be in the mortgage for less than three years and decide to pay the upfront fee themselves (instead of having the seller pay it for them), may actually save money by waiting until after October 4 to apply for an FHA loan. 

“Home buyers with a short term time horizon may actually benefit from this change because the upfront premium will be reduced to 1% from 2.25%,” Nicholas said. This change will impact over 30% of the home buyers in today’s market who use FHA-insured financing.


rismedia

Both 30 Year and 15 Year Fixed Rates are down to their lowest levels EVER!

Plus – in most parts of the country, home values as reported by both the National Association of Realtors and the S&P Case-Shiller Indices are higher than last year. If you were unable to refinance last year, the combination of your current home value and historic interest rates may provide you a greater opportunity to save money than ever before

Finally, even if your home has lost value from when your loan was originated, you may still be able to refinance. There are some special programs available that might allow you to refinance without private mortgage insurance, even if your loan will now exceed 80% of the present value..

Fixer-Upper Financing

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FHA 203(k) Loans on the Rise

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Tax Credit Guidance for FHA Loans

In his speech at the National Association of REALTORS® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage. The details of the program were announced in Mortgagee Letter 2009-15. Government entities and instrumentalities of government may provide a second mortgage. Currently, 10 state housing finance agencies (including New Mexico) offer a product buyers can use that will effectively monetize the tax credit for down payment purposes. Get information on New Mexico’s programs at housingnm.org. Read the HUD Mortgagee Letter. For information on FHA contact Jerry Nagy at 202.383.1233, jnagy@realtors.org.