FHA Delays Mortgage Insurance Changes And Other FHA Facts You To Know
Friday, August 27, 2010
Two weeks ago, FHA Commissioner David H. Stevens announced plans for implementing FHA’s new mortgage insurance premium structure. “As we work to publish a Mortgagee Letter, it is our intention to announce that based on industry feedback and our desire to have this change implemented successfully in the marketplace, FHA will make the premium fee changes on all new case numbers effective October 4th.”
What is he talking about? As previously announced, FHA will lower its upfront premium simultaneously with a planned increase in the annual mortgage insurance premium. FHA’s upfront MI premium will be adjusted down to 1% on all amortized loans (it was 2.25%) and the annual MI premium will increase to just under .9% on loans amortized more than 15 years.
When considering financing in today’s market, FHA loans have become more and more popular as they are not just for first-time homebuyers any more. In fact, the maximum FHA loan in metro-Atlanta is currently $346,250.
Two great features of FHA loans that are often overlooked are the following:
1) FHA loans are actually assumable by qualified buyers down the road. That could be a huge benefit to a potential seller with an FHA loan if interest rates rise in the future when they decide to sell their home. The loans are assumable but qualifying, which means that a potential assumer would have to have good credit but would pay limited closing costs in assuming the existing borrower’s loan.
2) FHA loan borrowers can refinance in the future under streamline conditions (no appraisal option is currently offered and limited documentation of employment and assets) if interest rates fall. It is FHA’s belief that a lower rate will only benefit the customer and would not pose an undue risk to the lender.
Finally, for existing FHA customers who are not sure if they have enough equity in their home to refinance, a new FHA streamline refinancing method allows a rate reduction to either a fixed rate or a 5/1 adjustable rate mortgage with no appraisal as long as certain conditions are met!
The 5/1 ARM is extremely attractive right now as closing costs can be included in a 4.0% rate on most loan amounts. That is about three quarters of a percent lower than refinancing on a traditional 30 year fixed with no closing costs and may be tailored more closely to the borrower’s desire to purchase another home in the near future when home values rebound.
The conditions required are that the homeowner must have an existing FHA loan, must come to closing with their prepaid items and current month’s payment, must realize a tangible benefit, and cannot have more than one 30 day late payment over the past 12 months.
Posted in: Intown Atlanta Real Estate News