Ron's Blog Conroe/Woodlands/Lake Conroe

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Home Buyers and the FHA

Many years ago we used to think that anyone who bought a house using an FHA loan was a bad credit risk or a first time home buyer with limited resources. Although that really was not true that was the prevalent thinking at the time. Today FHA loans may be the way to go. The interest offered are great and there are several programs available. However on July 14,2008 the upfront and annual mortgage insurance premiums associated with FHA loans will be restructured.
What does this mean for you? It could possibly mean higher and more expensive mortgage insurance. The amount of upfront fees and monthly mortgage insurance premium you pay will be based on your credit score, loan length and loan to home value. The formula is becoming more risked based. This is the result of the recent debacle in the mortgage industry.
What can you do to avoid this increase in costs? First of all you can buy before the new formulas go into effect. That means finding and closing on a home no later that July 13, 2008. The other option is to raise your credit score to 680 or above and buy after the new rates go into effect. Both of these options are viable. If you aren't sure how drop me an email and I will explain.
If you really want to read the Federal Register issued by the Department of Housing and Urban Development dealing with the subject here is the link:                  http://edocket.access.gpo.gov/2008/pdf/E8-10625.pdf 
Thanks and I hope you have a great day.
Ron

2 comments • Ron Wickes • May 15 2008 12:20PM

Comments

Ron:

Great information and very timely post. Thanks for keeping us updated.

Posted by Alan Kirkpatrick Austin Texas Real Estate (Austin Texas Homes) about 1 year ago

One of the Great Things about FHA is that the interest rates themselves are not Credit Score Drive (as is many conventional products) - only the MI roll in and monthly factors are adjusted. The maximum monthly MI moved up slightly from .50% to .55%.; the roll in is from 1.25% (better than before) up to as much as 2.25%.

 

See the table below:

Upfront MIP and Annual MIP for Loan Terms > 15 Years
LTV Credit Score
850 - 680 679 - 640 639 - 600 599 - 560 559 - 500 499 - 300 Non-Traditional
> 95.01% 1.25% / 0.55% 1.50% / 0.55% 1.75% / 0.55% 2.00% / 0.55% 2.25% / 0.55% N/A 2.00% / 0.55%
95% - 90.01% 1.25% / 0.50% 1.25% / 0.50% 1.50% / 0.50% 1.75% / 0.50% 2.00% / 0.50% N/A 1.75% / 0.50%
< 90% 1.25% / 0.50% 1.25% / 0.50% 1.25% / 0.50% 1.50% / 0.50% 1.75% / 0.50% 1.75% / 0.50% 1.50% / 0.50%
Upfront MIP and Annual MIP for Loan Terms < 15 Years
LTV Credit Score
850 - 680 679 - 640 639 - 600 599 - 560 559 - 500 499 - 300 Non-Traditional
> 95.01% 1.25% / 0.25% 1.50% / 0.25% 1.75% / 0.25% 2.00% / 0.25% 2.00% / 0.25% N/A 2.00% / 0.25%
95% - 90.01% 1.00% / 0.25% 1.25% / 0.25% 1.50% / 0.25% 1.75% / 0.25% 2.00% / 0.25% N/A 1.75% / 0.25%
< 90% 1.00% / 0% 1.00% / 0% 1.25% / 0% 1.50% / 0% 1.75% / 0% 1.75% / 0% 1.50% / 0%

I hope this makes sense for everyone.. The biggest problem now is all of the origination prgrams that lenders use will take some time to get the adjustments set to work properly.

Posted by Baine McClure (Countrywide) about 1 year ago

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