One of the overlooked changes that will affect all FHA borrowers, and will Annual Percentage Ratemake things even more challenging in the future, as loan officers have to explain to the borrower why their APR is so much higher than their stated rate.

If you are considering having your buyer (or are a buyer planning to) use an FHA loan in the next month or so, you should get to lender and get pre-approved at this time, so the FHA case number can be assigned before the change takes place on any case numbers assigned after June 2, 2013.

Here is what the APR interest rate change will look like for those with their FHA rate locked in before and after the June 2nd change.

Stated Rate Current APR - MI drop@78% APR with MI throughout loan

3.75 4.767 5.321

4.00 5.043 5.575

4.25 5.318 5.829

4.50 5.594 6.083

From this you can see that it appears the APR will be going up about 0.5% -- just from the fact that MI will no longer be dropping off the loan at 78%. How many people are going to appreciate what the government has done for them here?

That difference, on a $240,000 loan, with the up-front Insurance fee of $4,200.00 added in, is over $30,000 in additional fees over the life of the loan, as compared to the same loan with the mortgage insurance dropping at 78%.