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Are You Planning On Getting An FHA Loan What You Need To Know

 

David asks…

Does anyone know of any upcoming FHA guideline changes?

I am suppose to be getting FHA. Just worried cause there is so many things going on with the market that in a few weeks it may be impossible to get a loan.

admin answers:

One of the major changes that FHA has done in recent years is the change in how the principal mortgage insurance ( PMI) now works when getting a home loan.  As of June of last year 2013 if you were getting a FHA home loan and were planning only putting down the required 3.5%.  The PMI would be for the life of the loan.  This is a huge difference since it use to be that after 5 years the premium that you were paying for the insurance would go away.

Now if you do plan on putting down more at least 10% then the PMI will only be active for 11 years.  That is assuming that you are doing a 30 year mortgage.   PMI is basically insurance that the Federal Housing Administration  (FHA) charges you the consumer if you want this home loan, hence the term FHA loan.  It really give you no benefit other than being able to get the home loan.   It is really for the banks, in case you do not pay on your mortgage and they have to foreclose on you.   FHA will step in and cover any losses the bank suffer due to the foreclosure.   PMI is calculated based off of your loan amount.  There is a 1.75 % upfront cost that can be financed and then there is the annual fee of 1.35% that is divided by 12.   So for example on a $200k loan the upfront cost would be $3,500.00, and the monthly premium added to your mortgage payment would be $225.00

You can try to avoid paying PMI by trying to qualify for a conventional loan some loans allow you to avoid the monthly PMI with as little as 5%.  As long as you qualify for a conventional loan based off of credit etc.

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