FHA MI Changes – Good or Bad?
Beginning in October FHA Mortgage Insurance Premium structure has changed. These changes are important as the can possibly change the way one would structure a mortgage plan. The good news is that the Upfront Premium was reduced to 1%. That’s a substantial decrease in from the previous cost. The bad news is that the Monthly Premium was increased to make up the difference. For 30yr loan terms the new figures are
For LTVs =/<95% – 0.85% | For LTVs >95 – 0.90%
What does this mean and why does it matter?
The reduction in upfront cost means that over the short term the MI costs of FHA loans have been reduced. However, after a few years the homeowner is now paying more for the same loan. Additionally, with the Monthly Premium increase, the borrower’s purchase power is reduced.
This may even mean that the FHA option becomes less attractive than some other options. The conventional arena is once again squeezing in on what has lately been an FHA dominated market. The reintroduction of 95% conventional loans makes and attractive option to FHA, as these loans do not have an Up Front Premium and usually come with a lower monthly premium.
Of course there still are some very important differences between the two options. Depending on your particular goals for the home, qualifications, and tolerances, one will likely reveal itself as a better option. To learn more about these options give us a call or shoot us an email .Jeremy Beck 858-863-0262 firstname.lastname@example.org