Life is NOT over. There are alternatives!
This past Friday was the deadline to issue an FHA case number to avoid the forever mortgage insurance on down payments less than 10% down. Effective on June 3, if a buyer places less than 10% down using FHA financing, the mortgage insurance will remain on the life of the loan: yes...FOREVER! If the buyer can place more than 10% down, the mortgage insurance will last for 11 years. The old rules were minimum of 5 years and the LTV must reach 78% of the original purchase price.
So, one might say: just refinance if you are now stuck with the new rules. But refinancing costs money and the rates may never be this low again.
For those who can deduct the mortgage insurance costs on their taxes, they have some recovery. But, for those who can not deduct, they will be seriously thinking of refinancing in the future.
There are other options aside from FHA with low down payments for buyers to consider:
1) Fannie Mae and Freddie MAC: 5% down. Yes, there is mortgage insurance, but it only remains until 80% LTV is reached based on market value NOT purchase price. Mortgage insurance can be paid by the lender with a higher rate or paid with a single premium by the buyer.
2) USDA: if you purchase in a rural area AND you meet income limits for single family residences and condos that are FHA approved. There is mortgage insurance, but much less than FHA: approximately 1/3 of the cost and, yes, it is forever on the loan
3) VA: for our beloved VETS: 100% financing on 1-4 units.
4) Fannie Mae and Freddie Mac 10% down no mortgage insurance options are also available
Always choose a mortgage consultant who spends the time and advises you of ALL your options.
KNOWLEDGE IS POWER!
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