HomePath Renovation Vs. FHA 203k Loan: One More Reason To Use HomePath Financing
Starting April 18, 2011 the factorial used to determine annual mortgage insurance premiums for a FHA 203k loan will increase .25%. Based on today's annual mortgage insurance premium rate of .9%, with a 3.5% down payment on a 30 year mortgage, the .25% increase will result in a new rate of 1.15%.
Assuming a $200,000 loan amount the increase in mortgage insurance rates will cost the borrower an additional $41.66 per month. To determine the impact on a FHA borrowers monthly payment start by taking the monthly mortgage insurance premium factorial at .000958 (1.15%/12) and multiplying against the outstanding principal balance. Compare this using the old factorial of .00075 (.9%/12). This mortgage insurance change is calculated as follows:
- Current Premium: .009/12 * $200,000 = $150.00
- New FHA Premium: .0115/12 * $200,000 = $191.66
This increase in monthly mortgage insurance premiums should be one more reason why home buyers considering purchasing a Fannie Mae REO in need of repairs should use the HomePath Renovation Loan since
- There is no monthly mortgage insurance premium with the HomePath Renovation Loan Program. This means that the monthly payment on the HomePath Renovation Loan is actually less than a comparable fixed rate FHA Loan even though the HomePath Renovation Loan typically has a .50 to .75% higher interest rate, based on the borrowers credit score and down payment, than a FHA 203k Renovation Loan.
- No upfront mortgage insurance premium required on the HomePath Renovation Loan while the FHA 203k Renovation loan has a 1% upfront mortgage insurance premium.
- Fannie Mae Asset Managers seem to have a preference for the HomePath and HomePath Renovation loan program over the standard FHA and FHA 203k loan program, which results in offers backed by Fannie Mae financing having a higher likelihood of being accepted.
To learn more about your HomePath Renovation Financing options using the HomePath Renovation Loan Program go to HomePath-Renovation.com or email info@homepath-renovation.com. I specialize in HomePath Renovation Loan Financing. I am approved to lend nationwide and can be reached at (866) 351-3229.
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