FHA Loan Changes 2013!

Effective April 1, 2013- FHA will now increase (AGAIN) the annual mortgage insurance premium from 1.25% to 1.35%. Say you have a $100,000 loan amount. The new monthly mortgage insurance premium would now be 1.35% of $100,000 divided by 12 months = $112.50 per month.

Furthermore, effective June 3, 2013, all monthly mortgage premiums will now continue for the LIFE of the loan. If somebody was putting the minimal down-payment of 3.5% on a 30 year loan, they would pay that mortgage insurance mentioned in the first paragraph for the life of the loan or 30 years. That’s not good. Before, after paying down your mortgage for 5 years and you have reached 78% LTV, then this mortgage insurance is cancelled i.e. you don’t have to pay them anymore. Now if you have a 30 year loan, you would be paying it for 30 years.

Additionally, effective April 1, 2013, FHA will now require borrowers with Fico’s less than 620 and debt to income ratios exceeding 43% to be manually underwritten. Manually underwriting a loan is actually 50-50 with underwriting.

I will switch my clients to conventional loans if possible. It’s just that sometimes you have to go FHA because of a recent foreclosure or bankruptcy. Or maybe their credit scores are very low

Elizabeth Hammack
Allure Realty Group LLC

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