After May 31st, FHA mortgage insurance will be a permanent part of your FHA loan. If you are buying a home with FHA financing and you get a case number issued by May 31st, your mortgage insurance will be eliminated when you pay your mortgage down to 78% of the original balance. After May 31st, the mortgage insurance can not be eliminated.
Why is this important? FHA mortgage insurance is currently at 1.35% of your mortgage amount. So on a $150,0o0 mortgage amount, that is a monthly payment of $168.75. For the last few years, you have been able to eliminate that payment after you reach 78% of the original mortgage. The monthly payment adds up in a hurry, so it was nice to be able to eliminate that part of your payment.
Many people don't keep their FHA financing for 30 years, but with interest rates as low as they are now, it's hard to say how long you may keep this loan. As interest rates increase, it becomes harder to refinance just to remove that mortgage insurance.
For those looking to buy a new home, talk to your loan officer and see if you can get a conventional loan instead of FHA financing. That may be an option to look at. For those that have had foreclosures, it may be necessary to use FHA financing if you are trying to buy a new home. If you are looking at buying a 2-4 unit home (duplex, triplex), FHA does allow for minimum down payments and that may be worth paying the mortgage insurance.
FHA financing is still a good choice for many people but make sure you look at your options. If you are trying to buy now, see if you can get your purchase agreement written and accepted before May 31st so you can get a FHA case number before the deadline. Make sure you let your loan officer know you are writing a purchase agreement and give them enough time to get the case number ordered.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website
