The U.S. Department of Housing and Urban Development recently announced two minor changes to the Monthly Mortgage Insurance on Federal Housing Administration (FHA) loans. These two changes will go into effect on April 1, 2013 and May 6, 2013.
As of April 1, 2013, all FHA loans will see an increase in monthly mortgage insurance by .10 basis points. For example, on a loan amount of $270,000, this would be a monthly payment increase of about $23.
As of June 3, 2013, all FHA loans will experience a chance in the length of time to have monthly mortgage insurance. Previously, the majority of FHA loans would allow your monthly mortgage insurance to go away after five years if you also had a loan-to-value ratio of 78 percent (meaning you owe on your mortgage less than 78 percent of what your home is worth). As of this date, if you receive a FHA loan with a loan-to-value ratio of 90 percent or more, you will owe the monthly mortgage insurance for the life of the loan. As an example, if you buy a home with a 30-year FHA loan and put down three-and-a-half percent, you would owe your monthly mortgage for the entire 30 years. If you get a FHA loan with a loan to value of 90 percent or less, the monthly mortgage insurance will stay on your loan for 11 years. This change really only effects those who reach a loan-to-value ratio of 78 percent. However, at that time, in many cases, buyers could refinance into a conventional loan with no mortgage insurance.
FHA loans still allow many buyers to get into a home with the lowest rate, lower down payments, higher debt to income ratios and lower credit scores. Though, we encourage buyers pursuing an FHA loan to do so in March.
Equal Housing Lender. (c)2013 Academy Mortgage License #3113. GA Lic. # 20505. This is not a commitment to lend. Academy Mortgage Atlanta: 5565 Glenridge Connector, Suite 400. Atlanta, GA 30342. Georgia Residential Mortgage Licensee.