By: Mabel Davis
The new changes coming to the FHA loan program are just around the corner
A Continuing effort to help strengthen FHA‘s Mutual Mortgage Insurance Fund
Changes were released on January 31, 2013 by HUD in their Mortgagee Letter 2013-04.
The changes affecting new FHA case numbers on or after April 1, 2013 relate to the increase in the annual MIP that is charged. FHA will increase its annual Mortgage Isurance Premium (MIP) for most new mortgages by 0.10 percent. FHA will increase premiums on jumbo mortgages 0.05 percent. The chart below shows this in clear terms:
So, as you can see, the FHA loan changes will affect ALL loans regardless of down payment amount, even on those putting down 22% or more. These changes will naturally effect the FHA 203k Renovation Loans as well. If someone is putting down 20% or more why not consider conventional loan… Yes, even a conventional renovation loan, we do those too, as low as 5% down payment, and the MIP is lower on conventional, compared to FHA MIP. www.RenovationLoans.org
The second part of the FHA loan changes coming to a lender near you relate to the ability to remove or cancel the MIP after a period of time and/or LTV. In 2001 FHA cancelled required MIP on loans when the outstanding loan balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance for the life of the loan… So, effective for all mortgages with FHA case numbers assigned on or after June 3, 2013…MIP will remain for the life of the loan, where the original LTV is greater than 90 percent, or 11 years where the original LTV is less than or equal to 90 percent. Chart below, from HUD Mortgagee Letter 2013 – 04 shows the changes coutesy of HUD:
The FHA MIP increases will not effect streamline refinances transactions of existing FHA loans that were endorsed on or before May 31, 2009, HECM, Hawaiian Homelands or Indian Reservations.
These FHA loan changes will certainly cause a stir in the market, which is not starting a nice recovery in most areas. However, borrowers needing or wanting to take advantage of all that FHA has to offer (lower allowable credit scores, gift money, low down payment, etc.) will likely not be dissuaded from using the program.
However, those that have not yet been able to find “just the right home” may find themselves paying a higher monthly payment or looking at homes priced lower, and homes that may need work to be of the standard they were looking at in the higher price points or simply to qualify for any type of mortgage (leaky roof, no heat, no kitchen, wood rot or termites, a green pool, the list goes on). This presents a perfect opportunity to utilize the FHA 203k renovation loans or even the conventional renovation loan, which is offered by Wells Fargo Home Mortgage…see options at www.RenovationLoans.org.
Historically speaking, over the last 12 years, use of the FHA loan program has gone up and down…as can be seen in this chart from HUD’s 2012 Annual Report To Congress:
We can certainly expect to hear a lot more about the FHA loan changes coming to a lender near you as the time gets closer. We will undoubtedly hear a lot of miss-stated information on the changes as well. Please use the links provided here to refer to the actual source for the changes to get the real scoop: HUD Mortgagee Letter 2013 – 04 and HUD Press Release of January 30, 2013 and Annual Report to Congress Fiscal Year 2012 Financial Status FHA Mutual Mortgage Insuarance Fund!
Information provided by Dennis Hearing, Renovation Loan Specialist
- Changes in FHA mortgage insurance (homesbykaera.wordpress.com)
- FHA Loan Requirements – Requirements for a FHA loan refinance (streamlinerefinance.net)
- Big Changes Coming to FHA Loans in April and June (sheltermortgagenv.wordpress.com)
- FHA Loan Types | Kinds of FHA Loans | StreamlineRefinance.net (streamlinerefinance.net)
- Lock Your FHA Mortgage Rate : FHA Mortgage Insurance Premiums May Rise In Early-2013 (platinumelite.wordpress.com)
- Upcoming Changes to FHA Mortgages (raincityguide.com)
- FHA Refinancing to Avoid Foreclosure (streamlinerefinance.net)