FHA first shared these changes on August 4th, after it had been approved by Congress and then the President signed off on it on August 11th. FHA has finally come out with the mortgagee letter, ML 2010-28, which puts it officially in writing now.
This mortgagee letter is effective on FHA loans in which the case number is assigned on or after October 4th, 2010. This policy will increase the monthly mortgage insurance and decrease the mortgage insurance premiums for purchase money and refinance transactions, to include FHA streamline refinances.
So what are the major FHA changes regarding mortgagee letter 2010-28? - For terms greater than 15 years -
- LTV's <= 95% will increase the monthly fee to 85 bps >> Old monthly fee was .50 bps
- LTV's > 95% will increase the monthly fee to 90 bps >> Old monthly fee was .55 bps
And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.
How will this affect new homebuyers?
3 quick examples (these examples are putting the minimum down payment of 3.5%)
- On a $275,000 mortgage – the change in payment would be about $70 higher a month
- On a $200,000 mortgage – the change in payment would be about $45 higher a month
- On a $125,000 mortgage – the change in payment would be about $27 higher a month
Buyers Beware - If you have your eye set on a specific home, or are negotiating on a property, or are very serious about buying soon, you will have 31 days to make a mortgage application before these new changes take place.
FYI in regards to Charlie Ragonesi's comment, #4 - I still don't think that this will move buyers from FHA loans to conventional loanss. Here is my reason why... please read : FHA loans vs conventional loans - The buyer's buying power will only decrease by about $10,000 or so.
These 2 posts I wrote previously below go into more details about the changes and showing more detailed figures.
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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc