Effective for all FHA Loans with Case numbers issued AFTER 4/1/13 – and affecting all traditional 3.5% down FHA purchases:
- Monthly PMI (private mortgage insurance) will now be set at 135 BPS; without getting too technical about it, the bottom line is, this increase will cost the average FHA borrower at least $150 more per year.
- FHA is rescinding its current policy that allows automatic cancellation of the MIP payments once the LTV ratio on the loan hits 78%. Yes, the mortgage insurance premium will now remain on the loan for the life of the loan. This is quite an expense for the homeowner. This goes into effect for all loans assigned case numbers on 6/3/13 and after.
Unfortunately, FHA faces a more than $16 billion deficit due to a rise in delinquencies over the last few years. Since FHA insures about 15% of all U.S. home loans, this is significant since the number of loans it insures continues to increase in a pretty big way.
In addition to the above changes, FHA also is tightening its underwriting requirement on loan applicants with credit scores below 620 and total debt-to-income ratios greater than 43%.
If you are considering making a home purchase in the early part of 2013 – and are planning on using FHA backed financing – just be aware of the increased costs by doing so. If you want more details about how this will affect you specifically, do not hesitate to reach out to me and I’ll hook you up with a knowledgeable loan officer.