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FHA Loans. Did you Know?

Thursday, January 24, 2013 - Article by: MICHELLE DEMA - Embassy Funding LLC NMLS FL 1449883 & NY 854225 - Message

FHA Guidelines have been changing what seems to be on a monthly basis. The latest news regarding FHA loans is another increase in fee generation so that HUD doesn't go broke.

Within the last 3 years the upfront mortgage insurance premiums and monthly mortgage insurance premiums have changed mostly for the worse.

The fact that HUD lowered the up front premium from say 2.25 or 2.0 % to 1.75 % is a ruse. Yes it is a lower # , but a lower # that is financed over a 30 year period and no real benefit to a borrower when you consider the following. On a 200k loan at the 2.25 up front premium on a 30 year fixed mortgage putting the minimum of 3.5% down and using a 4% interest rate your Principle and Interest payment is 942.14. With the new 1.75 % up front payment your principle and interest on the same loan amount is 937.53 a whopping 4.61 in savings!

The monthly mortgage insurance premium went from .55 % on any loan over 90% Ltv to 1.25% on any loan over 90% Ltv. We are using a 30 year fixed mortgage for the purposes of this article, and based on that , prior to the changes your MI on a 200K loan would have been 91.67 per month, post change 208 per month! A difference of over 116.00 per month.

So it seems that HUD was really nice to lower the up front mortgage insurance premium while sticking it to us with the monthly. The obvious ramifications are more money for HUD and fewer people will qualify as the increased monthly insurance premium will put some people over the debt to income threshold.

As if that wasn't enough the latest is that very soon the previous HUD requirement was you had to pay monthly mortgage insurance on an FHA loan for a minimum of 5 years. After the five years if you could prove your loan to value was 78% or less the monthly MI payment would drop. New guidelines will state monthly MI will stay with the loan for life regardless of loan to value. It hasn't hit yet but will hit soon in some form.

Just a few facts regarding FHA

If you or anyone you know needs financing or has questions on buying or refinancing a home, have them call us. We will provide the Best Mortgage Option to suit your needs. Call 201-962-3555 and ask for Benny or Michelle or

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