FHA Upping Prices April 18th
The preponderance of home buyers in today's market who do not have a 20% down payment to buy a home are obtaining
FHA insured loan. Also many home buyers, specifically, those having a FICO score
of 720 or higher could have spent less money by getting a conventional mortgage
and private mortgage insurance (PMI). Especially now sense the FHA is raising
their costs for a second time in under six months.
While most often it's the job of the loan officer to know their way around mortgage lending, and with today's market
turmoil while the FHA is taking additional steps to cut down on the volume of mortgages they insure, it becomes important for buyers to comprehend two basic premises about private mortgage insurance. For example,
beginning April 18th, PMI can:
Even in the most vigorous housing market, itís hard to disagree with numbers such as this. Take a look at the comparison examples shown below to compare how the FHA's increased costs stacks up.
- Give buyers more than 18% purchasing power above FHA.
- Help more home buyers qualify by reducing the monthly payment of a buyer as much as 15% over an FHA loan.
Predicated upon a 95% LTV 30 year loan, with a $1,600 monthly payment with a 760 FICO score; 5% interest rate except for LPMI which features a 5.5% interest rate.
Predicated upon a 95% LTV 30-year loan, with a $285,000 base loan amount with a 760 FICO score; 5% interest rate except for LPMI which features a 5.5% interest rate.
Although there is uncertainty about imminent changes to home financing rules, there are couple of things that you can count on. FHA costs are increasing and, in a lot of cases, conventional loans with (PMI) will be buyer's best option. Number two, The Administrationís proposal that Congress let the conforming loan limit increases for FHA to run out on Oct. 1, 2011 as scheduled , it becomes clear that this will not be the last change to make certain the FHA goes back to its traditional, lesser role in US housing.
Now that you have had an opportunity to take a closer view at PMI from a renewed point of view, and when you take into consideration what figures like these above could mean for you (the home buyer). Simply think about the options. Better still, ask your real estate agent or lender to show you a comparison of the FHAís changed rates vs conventional
Apr 13, 2011
Real Estate Finance