There are 3 major changes that are going to be going go into effect very soon for FHA loans. FHA loans are known for being very helpful for homebuyers. They offer lower than market rates, low down payment of 3.5% and allow the seller to pay more of the buyers closing costs than conventional loans. Here are the 3 Major changes you need to know:
1. Monthly Mortgage Insurance is increasing. For all FHA loans on and after April 9th. The mortgage insurance is increasing by .10 and here is a quick explanation of the change:
30yr Mortgage(20 yr, etc)
LTV: 95% + Mortgage Insurance: 1.25
LTV:95% and under. Mortgage Insurance: 1.20
LTV:90%+ Mortgage Insurance: .60
LTV: 90% and under. Mortgage Insurance: .35
And don’t forget any FHA 15yr mortgage with a Loan to Value of 78% and less has no mortgage insurance. This increase of .10 to the monthly mortgage(30yr) would crease the payment of a $200k loan by $17 a month
2. HUD is also increasing the upfront mortgage insurance amount from 1% to 1.75%. This fee is actually financed into your loan. To give this change some perspective, the increase in up front mortgage Insurance will increase the payment on a $200k loan by $5 a month.
3. HUD just announced that on all FHA loans started on April 1st and after, borrowers must have collections paid off(total balance over $1000). This is a major announcement that sort of fell under the radar. But has major ramifications. What does this mean? If the borrower has a total of $1000 in collection balances then they must be paid off or proof the borrower has been in a payment plan for 3mths. This would mean a total of $1000 or more. Not just one account with a $1000 collection balance.
These are major changes that every homebuyer should to be aware of. And hopefully can find a home before these changes go into effect.