FHA Changes Part 2

Last week, FHA Commissioner David H. Stevens announced plans for implementing FHA’s new mortgage insurance premium structure.

FHA will make the premium fee changes on all new case numbers effective October 4, 2010.

FHA will lower its upfront premium simultaneously with

the increase to the annual premium. FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years.

Here’s what it means to the borrower;

Purchasing a $150,000 home;

Currently, the Upfront Funding fee cost the borrower 2.25% = $3,256, which is added to the loan. The monthly cost is .50% = $62 per month.

The Change, the Upfront Funding fee will cost the borrower 1.00% = $1,447, which is added to the loan. The monthly cost will be $110 per month.

PROS:

The borrower will finance less in funding fee for the term of the loan.

CONS:

The borrower will have a higher monthly payment thus lowering the amount of home they will purchase by $7-$8K.

The higher monthly payments will offset the lower upfront fee in a 3 year period and then will be a higher cost to the borrower until 78% Loan to Value is reached.

Information couresty of:
Ricky Catalano
Mortgage Loan Officer
776 E Riverside Dr Ste 100
Eagle, ID 83616
Office: (208) 938-6600
Mobile: (208) 440-9967
Fax: (208) 938-5749