FHA Changes Coming 10-4-10- Be Proactive!

 

 

 

Hi All,

 

Here is a summary and an example of the effect of the changes coming from FHA 10-4-10.

These changes are for loans with FHA CASE NUMBERS assigned on or after 10-4-10.  Case Numbers are assigned after an offer is accepted and AFTER the loan is submitted to the lender.

LAST THING FIRST is that some buyers that were borderline on qualifying a month ago MAY NOT QUALIFY after the changes on 10-4.  Please  be sure that any and all clients that are using FHA financing are going to be able to qualify after 10-4.  Do this NOW instead of rolling the dice when your clients find their dream home at the end of the month. Be aware and be proactive!

THE LEAST YOU NEED TO KNOW: While not a huge monthly increase it is important that you know at least the basics of these changes and that you are sure that your clients are qualified correctly and made aware of this change NOW. You DO NOT want your clients to find out their payment is increasing vs what they were originally quoted AFTER they have an accepted offer.  They look to you and your trusted Mortgage Professional to keep them informed of the changes in the market.  Springing this increase on them AFTER it takes place is not good business and it may cost you a deal (on the list side and/or buy side) or worse yet a relationship.

 

THE CHANGES

1. FHA UFMIP (Up Front Mortgage Insurance Premium) will be DECREASING on all FHA loans  from the current 2.25% to 1.00%.  UFMIP is charged on ALL FHA loans and is normally included in the loan amount AFTER the down payment (example below).

2. FHA Annual Premium will be INCREASING from the current level of 55BPS to 90BPS (30 year Mortgage with less than 5% down) and from 50BPS to 85BPS (30 Year Mortgage with 5% or more down) (example below).  This is how the monthly MI is determined (Annual Premium/12) (Note: 1 bps= .01%, ie. 85BPS= 0.85%).

15 Year Annual Premiums will remain at the current level of 25BPS for less than 10% down and 0 for 10% down or more..Little known fact on this one, that FHA 15 Year Loans with at least 10% equity have NO MONTHLY MORTGAGE INSURANCE. We are seeing a MAJOR increase in demand for the 15 Year FHA for both Purchases and Refinances.

 

Example: $300,000 Purchase with 3.5% down using FHA Financing, 4.25% 30 Year Fixed

 

                                        Prior to 10-4-10                                          After 10-4-10

Down Payment                    $10,500                                                     $10,500

UFMIP                               $6,513                                                       $2895

Loan Amount                     $296,013                                                   $292,395

Monthly Principle+Interest   $1456.21                                                   $1438.41

Monthly MI                        $135.67*                                                    $219.29    

Monthly Payment

(Principle+Interest+MI)       $1591.88                                                   $1657.70

 

*($296,103X.90) /12= $135.67

 

Be aware of these changes and be sure that your clients are aware ASAP!  Later this week I will be covering the changes to USDA and our Government Bond 100%/NO MI Programs...

Thanks and have a TREMENDOUS week!

KP

 

 

 

 

 

 

Keith Pentz

Senior Loan Officer/Certified FHA 203k Specialist

Prospect Mortgage- Greater Worcester

324 Grove Street, Worcester, MA 01605

Apply 24/7 @ www.prospectworcester.com

774.232.1690 cell!