There are two big changes going on in the mortgage world in the next few months. One of the most popular types of low down payment mortgage loans known as a Federal Housing Administration loan, or FHA loan for short, will be making changes to the mortgage insurance premium collection policy (you may know it as mortgage insurance, or MI).
If a new borrower’s MI is not ordered before April 1st (meaning the final contract is completed), the annual MI, which is included in the monthly payment to the lender, will increase by .10%. That means that if you have a loan amount of $180,000, you would pay an extra $15 per month on your mortgage payment and, more specifically, towards your MI, if your MI is not ordered before the April 1st deadline.
So what do you need to do?
If you are already in a loan, locked in, and not looking to refinance, these changes do not affect you. If you are in the process of buying a house and need FHA financing or you are planning on refinancing, you need to speak with your Walden Mortgage Group loan officer as soon as possible to lock in the lower MI. You must have your final contract completed by Friday, March 22nd at 5:00pm to ensure proper processing turn times are allowed for what will surely be a busy last week of March.
The second, and possibly more impactful change, will occur for new borrowers who do not lock in their MI before June 3
rd, 2013. Currently, if you are paying MI, you can drop this added monthly fee after 5 years of owning your home, as long as you have made on-time payments and have paid the loan down to 78% of the original sales price. For those who miss this deadline and still
desire to use FHA financing, you will be required to pay the higher MI for the entire term of your loan! After the 5th year in your new home and with a loan amount under 78% of the original sales price, you would have to refinance your loan to drop the MI, but likely to a higher interest rate as rates will likely not be as low as they are today. In order to lock in your MI before the June 3rd deadline, a completed contract is needed before Friday, May 24that 5:00pm.
These changes can be confusing. Walden Mortgage Group is here to help. If you have any questions regarding FHA loan changes, mortgage insurance or today’s interest rates, contact your Walden Mortgage Group loan officer at 859.514.4444 or visit our website.