Changes to FHA Financing – Effective April 1, 2013

On February 4, 2013, in Buyers, by David Monsour

Liquidity problems at FHA generally result in changes to the mortgage insurance policies.  They have two options to generate more revenue.  Increase the upfront Mortgage Insurance Premium (MIP) which is paid as a lump sum at settlement.  The other option is to increase the monthly Mortgage Insurance Premium.  This is a monthly fee that is paid until the home owner reaches 78% equity.

The current change is relatively insignificant but it will increase your monthly payment.  On a $100,000 loan the monthly MIP will increase your payment by $8.33 per month.  As the loan amount increases  the MIP payment will also increase.  The change is from 1.25% to 1.35%.

Due to the expense of the FHA mortgage insurance and it’s effect on payment I’d be looking to compare 5% down conventional loans and costs when shopping for a mortgage.  The major difference is that FHA interest rates are a bit lower and you need less money down but the conventional loan allows a buyer to purchase a home that may need a little work.  FHA loans require houses to be in a state of good repair.

Disclaimer:  There is an FHA 203k loan that is used for rehabbing properties but it’s a bit more expensive upfront and the buyer must buy at a good price so that the repair cost can be financed. 

 

Rates are going up so if you’re shopping for a Gettysburg or Hanover home it’s time to get off the fence.  

Comments are closed.