Here we are
again. As we begin to come out of the
housing market decline, the cost of FHA loans is due to increase. Its official, FHA has publicly announced
and confirmed that FHA buyers will pay mortgage insurance premiums (MIP) for the
life of their loan on or after April 1, 2013. Unlike previous FHA backed loans,
the purchaser was allowed to drop MIP off their loans once their homes reached
22% equity and a minimum of 5 years.
The increase
is set to .10 basis points. If you get a
FHA loan for $300,000 your MIP contribution would be $30 added onto your
mortgage payment for the life of the loan. There is also talk of increasing the
down payment requirement from 3.5% to 5% which may make home ownership harder
for some.
Due to the
upcoming changes on FHA loans, buyers
may want to consider looking into alternative financing such as Conventional
loan programs that do not have mortgage insurance premiums.
Example (provided
by a mortgage lender)
Cost of home
$400,000
Conventional option:
5% down, loan amount $380,000, interest rate 3.75%, 30 year fixed. Buyers total (principle and
interest, taxes and insurance) payment = $2,176 a month.
FHA option:
3.5% down, loan amount $386, 000, interest rate 3.5%, 30 year fixed. Buyers total (principle and
interest, taxes and insurance ) payment = $2,552 a month, resulting in an monthly
increase of $376 a month which is $35,000 over the next 10 years!
Bottom line…….the
overall cost of a FHA loan is going up!
If you have
been thinking about purchasing a home, I highly encourage you get moving now
before you're loan is subject to the new rules or look for other financing
alternative.
Need additional info? JUST ASK
Need additional info? JUST ASK
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