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Tags: FHA Mortgage Calculator, FHA vs Conventional, Loans for First Time Home Buyers
Changes to FHA Home Loan Approval Rules
Securing an FHA mortgage is about to get more expensive.
The FHA announced Wednesday that it is making a few policy changes to reduce their overall risk.
It will mean tougher approvals and higher costs to secure a mortgage approval for those who wait.
As listed in the official announcement, there are 3 major guideline updates for the FHA:
- Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
- Minimum 10% down payments for those with less than a 580 FICO
- Seller concessions are being limited to 3%, down from today’s allowable 6%
The FHA has also appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums. The reason the FHA vs Conventional comparisons keep favoring FHA is that the premiums are so low.
It’s clear that the Federal Housing Administration needs to clean up their portfolio and yet balance their mission of creating affordable mortgage loans.
They are also going to start improving the quality of their lenders. They are introducing a “termination clause” to attack the problem where it starts. Should certain lenders represent a disproportionate number of the bad loans, they will lose their right to originate FHA loans.
As a result, home buyers can expect tougher FHA underwriting in 2010. This won’t be as much due to the guideline changes, but more due to the “termination clause.” For lenders to prevent being the “bad lender,” they will add overlays to insure that they do not have a disproportionately bad portfolio. Examples of this already exist: The FHA will allow 580 FICO scores, but nearly all lenders require at least 620 FICO.
The new guidelines don’t go into effect until spring, but acting now will save the up-front mortgage insurance premium monies plus lock in today’s monthly mortgage insurance payments before those too get more expensive.
Tags: FHA, FHA Interest Rate, FHA Mortgage Rate Predictions, FHA Mortgage Refinance, FHA vs Conventional, government loan programs, MIP, Mortgage GuidelinesFHA Interest Rates Back to 5%
It’s been an interesting week for the FHA loan rates.
We’ve had every piece of bad news that mortgages could hear:
- The economy is rebounding. We’re seeing expansion in nearly every key metric.
- Housing is on a roll. This also has negative signals for the FHA interest rates.
- Inflation is starting to creep up. Inflation equals higher rates.
Still, after all of this bad news and after losing 11 of the last 15 trading sessions, the FHA mortgage rate is still at 5%. That’s surprisingly great news.
We’re still looking at an odd scenario where the rate is 5% for FHA vs Conventional rates at 5% as well. That conventional rate requires a 740 FICO for the best rate. For a buyer with a 700 FICO score, it is actually cheaper to get the FHA loan. That’s significantly different than just a few years ago.
Tags: FHA Interest Rate, fha loan, FHA Loan Rate, fha programs, FHA vs Conventional, government loan programsFHA Interest Rates Almost 2 Points Lower
It’s been an incredible month for the Government loan programs.
Today, we’re looking at the 4.75% 30 Year Fixed Rate.
On October 16th, the discount points required to buy the loan down to 4.75% was 1.82%.
As of today, it’s…..0.000%.
This is a staggering 182 basis point run in just 45 days. On an average loan of $250,000, this is a whopping $4,550 in reduced closing costs to end up with the same low FHA loan rate of 4.75%.
We’re currently at the best rates of all time. Even one year ago when conforming rates dropped, the FHA vs Conventional comparisons were not this even. We’re now only seeing a spread of .125% between the two rates and the comparisons increasingly favor FHA when either of two conditions is true:
- Credit score is below 720
- Down Payment is less than 10%
Under either scenario, you’re looking at sub-5% rates but long-term savings typically lean towards the FHA programs.
Tags: FHA Interest Rate, fha loan, FHA Loan Rate, fha programs, FHA vs Conventional, government loan programsFHA vs Conventional – Up-front Costs
Both the 30 Year Fixed Conventional and FHA loan rates dropped even lower this week. These rates are now pressing against some of the best rates of all time, set almost exactly one year ago.
FHA vs. Conventional
We’re going to look at another comparison. We’ll focus on a 700 FICO score, 5% down payment, and we’re assuming a single-family residence. We’ve used a price of $300,000 for both examples.
Monthly Payment
In terms of monthly payment, the FHA mortgage nearly always is cheaper for the 700 FICO score borrower.
This is largely because the PMI is .94%. That should be read and referred to as a percentage. Since the FHA PMI is only .5% in this scenario, the conventional loan’s effective rate is roughly .3% higher. The Conventional PMI is .44% higher and the interest rate is .125% lower. Jump to the end of the article for the full data.
Tags: FHA Interest Rate, FHA Mortgage Calculator, FHA vs ConventionalFHA vs. Conventional 700 & 680 FICO
The FHA Loan Rates continue to trade within just a narrow margin relative to conforming. With credit scores driving the conventional mortgage rate and the associated PMI, here’s a comparison of how the FHA vs. Conventional dynamic changes based on credit score.
Today’s example uses a $300,000 home at 5% down. The FHA mortgage rate won’t change, nor will the monthly mortgage insurance. Here’s a look at the data:
Tags: FHA Loan Rate, FHA vs ConventionalFHA vs Conventional Revisited
This was a bummer. It was way back in August that I posted the last FHA vs Conventional comparison for a buyer with 5% down and a good, but not perfect, FICO score at 700.
I sat down yesterday to run the numbers again. It was November 1. The last post was August 27. We’ve seen the GDP jump. We’ve seen the Fed’s mortgage backed security purchase program begin to wane. We’ve seen housing numbers come in hot and housing supply dwindle.
The numbers were the same. The 30 Year Fixed Conforming was 5%. It was also 5% for the FHA interest rate.
Recap of the last FHA vs Conventional Comparison (see the prior post for the full numbers):
- Monthly Payment: FHA wins. Lower due to the lower monthly mortgage insurance component.
- Total Cost: The FHA is a worse option for about the first 24 months due to the up-front mortgage insurance cost. After that time, it outperforms the Conventional loan.
FHA vs Conforming Over 10 Years
There was one point that was not addressed well in the old post: The same FHA monthly mortgage insurance that is lower on a monthly basis is also permanent. Unlike PMI, it doesn’t go away at 80% loan-to-value (or 78% on a refinance transaction). The FHA “PMI” survives the life of the loan until it is either paid off over many years or paid off at once via a refinance.
A 95% loan reaches 80% loan-to-value just short of ten years. So, we’ve expanded the comparison from five years to ten.
Tags: FHA Interest Rate, FHA Mortgage Calculator, FHA vs Conventional