On April 18th, FHA is changing their mortgage insurance fees. Currently FHA charges .90% for the monthly mortgage insurance premium if you are putting less than 5% down on a 30 yr mortgage. If you put at least 5% down, the mortgage insurance is .85%. As of case numbers ordered on April 18th, the rate is going up .25%. So the monthly rate on a typical FHA loan will increase to 1.15%. On a $150,000 mortgage, it will increase your payment by $31.25 per month.
The upfront fee of 1% of the base mortgage amount is not changing. That will stay the same for now!! FHA is talking about increasing different fees to help build up their reserves due to the number of foreclosures and the amount that they are required to have in reserve.
If you are looking at homes and thinking about putting in an offer, you may want to make sure you can get the purchase agreement accepted prior to April 15th to avoid the increase in the mortgage insurance.
You should also talk to your loan officer and compare a conventional loan with a FHA loan and see which one is better for your situation. If your credit score is good (especially over 720-740) and you have 5% of your own money, a conventional loan may be better for you. The mortgage insurance premiums will vary based on credit score (so will the interest rates), but overall the payment may be less as the mortgage insurance could be as low as .78%!
With the current changes to FHA and different options available on conventional loans, it definitely pays to look at both mortgages and compare. If your credit score is under 680, you may not have a choice and may need to stay with FHA. If your debt to income is a little high, you may also need to stay with FHA. But you want to make sure you look at all of your options for financing now more than ever before!!
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
