The popularity of the FHA mortgage for home buyers following the economic downturn of 2008 increased heavily in 2009, and peaked in 2010 before decreasing two straight years in terms of overall market share of all types of purchase home loans. Regardless of the recent decline in FHA mortgage popularity, FHA mortgages remain a staple in many housing markets across the United States. For Louisville home buyers, the FHA mortgage continues to fund a substantial percentage of Louisville home buyers as they go to buy Louisville homes. FHA loans are for primary residence purchases and refinances.
Since the demise of most 100% financing options following the economic collapse of 2008, FHA mortgages have become the choice of home buyers with little cash and little credit. Home buyers can get an FHA mortgage with as little as 3.5% down. FHA mortgage rates continue to compete with, if not, beat those of Conventional financing. Conventional financing typically requires more of a down payment (5% & up).
In April of 2013 and again in June of 2013, FHA mortgage loans will undergo changes that will impact home buyers for years to come. On April 1, 2013, The Federal Housing Administration (FHA) will enact a change to the annual mortgage insurance premium that will increase it by .1% which equates to a difference of about $10 per month more for a home purchased for $115,000. That isn't awful in terms of increased costs to consumers, but the June change is rather large.
On June 3, 2013, FHA mortgage insurance will no longer be waived after five years with the loan and a 20% equity position. Instead of falling off after five years or proving a 20% equity position, the FHA mortgage insurance will be for the life of the loan. This means that most home owners will want to either sell their home sooner than they may have prior to this change, or certainly refinanance into a Conventional loan should they desire to remain in the home longer.
The main thing current Louisville home buyers and home buyers in general need to know about these changes is that in order to avoid these consequences, home buyers need to have a signed purchase agreement in processing with their mortgage loan professional prior to these dates. In the case of the April 1 deadline, many mortgage pros are advising potential buyers to put a contract on a home by March 25 due to high volume and potential underwriting delays.
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