FHA Mortgages: Enough Already!

Borrowers are going to pay more for an FHA loan in 2012.  FHA mortgage insurance premiums are going up AGAIN.  This change could possibly take an approved loan file straight to the DENIED bin.

The recent, signed legislation to extend the payroll tax deduction means an increase in FHA’s mortgage insurance premium.  The FHA (Federal Housing Administration) has 2 charges to the borrower:

·        Up Front Mortgage Insurance, which is currently 1% of the loan amount

·         Annual Mortgage Insurance, currently at 1.15% and slated to increase to 1.25%

How could this affect you?

It could end in loan denial.  Namely, if as a borrower, you are near the limits of allowable debt-to-income ratios.  For example, on a $250,000 loan, this increase will add another $26.04 per month in additional mortgage insurance which also gets added into the debt-to-income ratios.  This increase couple topple the peak of allowable ratios and result in a denied status on your loan.

What do you do?

We Are All About Solutions!

Two things:

1. If you are an FHA buyer, get off the fence, find your home and CLOSE on your loan…now rather than later.   Push that spring market today!  Heck, even if you do still qualify after the increase, who wants to pay extra mortgage insurance?  Pew.
2. Convert your financing goals to conventional financing.  With as little as 5% down (good credit needed), you can get a loan with NO monthly MI.  HUGE advantages:

               a.       No monthly MI means your purchase power just increased dramatically (see illustration below).

b.      Sellers and banks LOVE conventional offers!

c.       Many lenders will tell you that there is a rate increase for doing this “flavor” of conventional financing (called single premium financed MI).  DON’T LISTEN.  You can get the SAME rates as those borrowers paying monthly mortgage insurance.  You just need to work with a lender who has that capability.

Happy House Hunting!