The President officially signed Bill H.R. 5981 on August 11th, 2010 which became public law. I wrote about the actual changes to FHA loans and how it will affect borrowers as of October 4th, 2010. Please read : Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium
There has been a main problem in regards to the information being supplied since this bill was passed by the Senate, which was on August 4th, 2010. I have read several blogs out on the internet both by AR members and the news media stating that the monthly mortgage increase has been raised to 1.55 basis points. This is correct and incorrect. Read below...
The following summary below was written by the Congressional Research Service.
Yes, congress passed the monthly mortgage insurance to 1.55 basis points. But this is a cap and not the actual amount that FHA is prepared to use on all FHA loans for now. The new monthly mortgage insurance rates will be either .85 or .90 basis points, all depending on the amount of your down payment., which I explained in this post. FHA Mortgages monthly mortgage insurance changes - effective October 4th, 2010 -
But if you read some of these other posts, they don't explain it this way. Some give examples of the mortgage payments of like $167 more a month on a $200,000 mortgage, which is based on 1.55 basis points. If you actually use .90 basis points, that mortgage payment now increases only to $59 more a month. Sorry folks, but that is a huge and misleading difference of $108 a month and could scare possible buyers away if not properly educated about this new change for FHA loans.
Keep in mind though, FHA will not need the approval from Congress to ever change these rates as long as they don't exceed 1.55%.
Another thing, HUD has not released a FHA mortgagee letter as of yet. But FHA did announce this as a press release with a FHA letter. FHA Mortgages - change in mortgage insurance Any and all FHA case numbers assigned on and or after October 4th, 2010 will be subject to these new changes.
3 quick examples :(both examples are putting the minimum down payment of 3.5%)
- On a $275,000 mortgage - the change in payment would be about $70 higher a month
- On a $200,000 mortgage - the change in payment would be about $45 higher a month
- On a $125,000 mortgage - the change in payment would be about $27 higher a month
These FHA Loan changes are the same, no matter what state you reside in.
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc
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FOLLOW ME ON FACEBOOK
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- FHA Home Loans - Mortgages -
Experience & Knowledge at its BEST !!!
Follow me on:
______________________________________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc
Jeff, As always, you separate the fact from fiction! Thanks for setting the record straight.
Jeff,
I don't approve!
But, in the grand sceam of things it's a pittance for the chance to own your own home with little to start with. It's not good but it's relative.
Bill
I'm glad to hear the premium won't actually be going up to 1.55%...at least not any time soon, it seems. Thanks for the information!
Jeff - Nice find Jeff on the passage of HR5981. It will be interesting to watch how this unfolds. If the FHA Insurance Program begins to suffer further losses it may be forced to act sooner rather than later. We should all keep an eye out as the full 1.55% would have an impact on DTI's and be ready to let HUD know what the impact may be on your typical FHA borrower. ~ Doug
DEBORAH.... . my pleasure and thanks... we just need to be super careful when putting information out there. thanks
WILLIAM... . bah humbug. Did you wake up on the wrong side of the bed? I guess you were the one that thought conventional 100% programs were better? I know you have a thing against FHA loans, but it's a loan that can be underwritten with common sense. thanks
SHANNON...... . well, let's hope not... because as you can see, it certainly increases the mortgage payment much more. Just a fyi... if you were to put 5% down on a conventional loan, if you don't have a credit score above 680, your chances of going with a conventional loan are slim. If you could and you had a 670 credit score, your monthly mortgage insurance would be higher than on a FHA loan... so FHA loans are still a great source... thanks
DOUG.... . it will be interesting, but no matter what happens, I hope FHA just keeps it here... anything more could just hurt buyers and our recovery much more. thanks for the compliment and for the comment.
This is such an informative post, thank you for sharing, Jen
Jeff, It's going to take a bit for the industry to clarify the points you're making. This can make a big difference when calculating the cost of an FHA mortgage product.
Steve
jeff, you share such solid information with us & it is appreciated because many people are reading things inaccurately...thanks
Jeff, Thanks for the post to correct some of the miss information that consumers will find on the internet. I have reblogged for potential home buyers and individuals considering refinancing. As you know this is important to both groups.
Good information Jeff, thanks for setting the record straight.
JENNIFER.... . my pleasure and thanks for stopping by..
STEVE & JOEL.... . this certainly can make a huge difference. Calculating an extra $108 as a mistake is huge. The only good that comes from that is if the loan officer had originally used the 1.55% factor and the borrowers were okay with it... and to get to closing to find out that their payment dropped... wow, now that would be an awesome surprise. right?
GINNY... . thanks for the kind words and compliment.
TIM... . I definitely thought that this needed corrected.... especially since others had reblogged the other post and because the media was writing about the change and they were very clear either. And yes, this is very important to both groups. thanks
GABE.... . my pleasure and thanks for the compliment... and for stopping by.
Mr. Belonger,
"bah humbug" In deed!
A cost increase is a cost increase, I don't approve.
FHA single family insurance has always made huge profits! Even during the "235" scandals. The single family insurance should have been the governments biggest/only success, a true cash cow. FHA loses money because of their misguided, mismanaged social programs! Once again the tax payers and home owners are ask to subsidize the most oppressive government agency.
I thought my position was very pragmatic! The fact that a increase could have been more doesn't make them good! If you need a home FHA is possibly the best loan today. But, in the grand sceam of things it's a pittance for the chance to own your own home with little to start with.
Common sense underwriting I'll have to take your word for!
William