FHA Delays Mortgage Insurance Premium Increase until Oct 4, 2010

FHA Delays Mortgage Insurance Premium Increase until Oct 4, 2010

Hud has announced that previously announced FHA Premium Changes will now be implemented Oct 4, 2010, delayed from the original plan of Sept 7, 2010. Go here to view the Statement from Deputy Assistant Secretary Vicki Bott on the change.

This will create some opportunity for folks purchasing and refinancing their homes to take advantage of the current MI premium plans, which are less expensive than the new FHA MIP program.

Please view the following articles for more information on comparing the old and new FHA MIP premium structures, and how they effect you:

FHA Changes to Mortgage Insurance Premiums authorized in House Bill HR 5981

Part 1: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!)

Part 2: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!)

To get started on your FHA Loan today, please visit our online application at vandykfunding.com or call us direct at 760-752-4480, ask for Brian Skaar.

Part 2: One size shoe does not fit all borrowers.

Part 2: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!)

In our previous article, Part 1: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!), we compared the new FHA Mortgage Insurance premiums and compared the monthly cost to a 95% conforming loan with MI, and a 95% conforming loan with NO MI. While the monthly payment leads us to think that the conforming (or conventional) loans are now the best option, one size shoe does not fit all borrowers.

First let's compare and discuss the conforming loan options:

• MI is cancellable before 60 months if your property increases in value a sufficient amount Whereas FHA MIP is required for a minimum of 60 months before cancellation, regardless of property value growth.
• Rates are similar to FHA rates - so that is not a pro or a con.
• The conforming loan with no MI has the lowest overall payment of the 4 options.
• Require 5% down payment
• Requires a 680 fico score
• requires a debt ratio of 41% or lower

Benefits of the FHA Loan option (3.5% downpayment):

• Low downpayment required - 3.5%
• Down payment can be from Gift Funds
• lower ficos required (We offer FHA Loans down to a 580 middle score).
• FHA allows higher debt ratios, up to 50%
• FHA allows non-occupant co-borrowers such as parents helping their kids get a start

As you can see, one shoe doesn't fit everyone, and every borrower's finances and goals are a little different. Let us work with you to find the most suitable loan option to meet your needs, for now and the future. Contact VanDyk Mortgage direct at 760-752-4480, ask for Brian Skaar.

Part 1: one size shoe does not fit all borrowers.

Part 1: Why FHA Loans will still be the better choice for many home buyers ie. one size shoe does not fit all borrowers!

We just posted information on the new FHA Mortgage Insurance Changes. I examined the options that now come to mind as potential competitors for the selection of a loan with low downpayment, or little equity.

We compared the following loan options:

1. FHA Loan with 3.5% down
2. FHA Loan with 5% down
3. 5% down Conventional loan (yes, we offer this in california with a 680 fico)
4. 5% down conventional loan with no MI (we pay the MI for you).

As the table below illustrates, the payment is similar between the 95% conventional loan with PMI and the FHA Loan with 3.5% down. The FHA loan requires less downpayment, and is therefore more beneficial in my analysis. However, the 95% Conventional loan with no MI now becomes the lowest payment option, in spite of a higher interest rate (required to cover the cost of the Mortgage Insurance, which is paid as a lump sum upfront by the lender at no cost to the borrower).

Check out our next post for more reasons why FHA will still be the loan of choice for many.

Here is a link to the spreadsheet of the numbers for these low down payment options.

VanDyk Mortgage is a FHA Lender offering FHA, FHA Jumbo, FHA Streamline, and FHA 203K Renovation and 203K rehab loans thoughout California and Washington state. Call Brian Skaar direct at 760-752-4480 to get started.

Click on the table below to enlarge:

House Bill 5981 authorizes increased FHA Mortgage Insurance Premiums

House Bill 5981 authorizes increased FHA Mortgage Insurance Premiums

Congress passed house bill 5981 this week, authorizing FHA, The Federal Housing Administration, to increase the Annual Mortgage Insurance Premium. Here is a letter from FHA Commissioner Stevens on the MIP changes.

There is good news and bad news. The good news is that the Upfront Mortgage Insurance Premium (UFMIP on your HUD1/Good Faith Estimate) is being reduced to 1.0% from the current level of 2.25%. Now the bad news: The Annual Mortgage Insurance Premium (which is paid monthly by the FHA Borrower) is increasing from .55% to .90% for FHA loans above 95% Loan to value, and from .50% to .85% for FHA Loans at 95% or lower loan to value.

So the important questions are:

When does it go into effect? The new rates will apply to all FHA case numbers dated Sept 7, 2010 and later. FHA Case #'s prior to this date can still qualify for the existing MIP rates.

How does it effect my FHA loan? This will only effect new FHA Loans, existing FHA Loans will adhere to the their current MIP Rates (ie no changes).

Is it more expensive or cheaper than now? The overall cost to the borrower actually increases with the new MIP Rates. On a $100K home purchase, with a 4.5% 30 year fixed FHA Loan, the monthly PIMI (Principal, Interest, Mortgage Insurance) payment will be $566.94 on the new plan. The old MIP rates would have yielded a PIMI of $554.12, about $12 per month lower. You can also extrapolate your effect for your potential loan as this payment sample is per $100K purchased.

Now $12 per month is not the end of the world, but the increased monthly cost of MIP will reduce the homebuying power of Americans in a time we are trying to keep housing strong with good financing options. The cost over 5 years is about $2,133 total. FHA Jumbo Loans will feel the impact the most, as the loan amounts are much higher (up to $729,750)

However, FHA Loans still offer huge benefits to qualified borrrowers for many reasons. Check out our next post as we examine why FHA Loans are still a better choice for many homebuyers and refinancers even with the higher MIP rates.

What should I do? If you have been thinking about refinancing with a FHA Loan, purchasing with an FHA Loan, or Streamline Refinancing your FHA Loan, the time to move is now. Call us to get started, and lock in the old MIP rates for your loan before they go up.

Check out the FHA Loan Limits for your County:

2010 FHA Loan limits for California

2010 FHA Loan limits for Washington

Please contact Brian Skaar direct at 760-752-4480 or visit us online to get started now at www.vandykfunding.com. We are Direct Lenders offering FHA, FHA Jumbo, FHA 203K, and FHA Condo Loans. (plus VA, VA Jumbo, and VA Condo Loans).