FHA : Monthly Mortgage Insurance Premiums To Rise April 18, 2011

Filed under FHA Mortgages by on March 4, 2011 at 7:47 am {no comments}

FHA Mortgage Insurance Increase April 18 2011For the third time in 12 months, the is changing its costs. 

Effective for all FHA case numbers assigned on, or after, April 18, 2011, annual mortgage insurance premiums () will increase 25 basis points.

The change will add $250 to an FHA-insured homeowner’s annual loan costs per $100,000 borrowed, and applies to all borrower’s equally. Current FHA borrowers are unaffected.

To understand the FHA is to understand why premiums are rising.

As an institution, the Federal Housing Administration plays a much larger role in the U.S. housing market today than it did just 5 years ago. According to its own records, the FHA’s percentage of purchase money business nationwide expanded from 4 percent in FY 2006 to 19 percent in FY 2010.

Rapid growth like this has strained the FHA’s capital and, indeed, in its official statement, the FHA alludes to this, stating that the MIP increase will “significantly strengthen” its reserves. By law, the FHA must maintain a certain minimum level of reserves.

(more…)

Tags: , ,

Today’s FHA Interest Rates v. November’s

Filed under FHA Interest Rate by on February 25, 2011 at 7:13 am {no comments}

 interest rates don’t exactly follow the Freddie Mac  results, but they’re close enough that we can use them for comparison.

Yesterday’s survey had the 30 Year Fixed at 4.95% and had it at 4.30% back in November.

If you look at that on a normal FHA loan, 3.5% down, the payment difference is fairly signficant for it only being four months ago.  We’ve used a $300,000 price, a $289,500 base loan amount.

Using those interest rates, it’s a $113/month difference.  That’s a whopping $18,940 in the first 10 years. 

So, for FHA interest predictions does it make sense to wait for rates to come back down?  No.  It’s a lot more likely that rates are heading higher, not lower. 

(more…)

Tags: , , , , ,

Changes to FHA Home Loan Approval Rules

Filed under FHA Mortgages by on January 21, 2010 at 8:47 am {no comments}

New FHA guidelinesSecuring an 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:

  1. Upfront premiums are increasing to 2.25% from 1.75%
  2. Minimum 10% down payments for those with less than a 580 FICO
  3. 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 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: , , , , , , ,