The huge benefits of FHA financing (Federal Housing Administration) has been a huge boon to housing since it’s inception in 1934 . FHA is an arm of HUD (Housing & Urban Development). However, since our real estate and economic recession began, FHA has gone through a series of dramatic changes. I feel this is HUGE for a lot of first-time buyers, as FHA allows a low 3.5% downpayment!! Especially the part that dictates that as of 06.01.2013, Mortgage Insurance (MI) on any new FHA loans can never be cancelable!!!!! Currently, once you pay down your mortgage and/or the appreciation gives you a loan-to-value of 80%, you can cancel your MI premium. That being said, I still contend that assumable loans will one day, once again, have the power they did in the ’80s (and, FHA loans are still assumable by a qualified buyer)!!
* The monthly cost of FHA (Federal Housing Authority) Mortgage Insurance (MI) is going up, effective
with any new loans assigned from April 1st, 2013. The mortgage insurance premium is going from 1.25 to
1.35% of the loan amount. On a $250,000 loan this is $21+/month. This lowers the amount of a
loan a borrower will qualify for by about $4,000 in price.
* There will be monthly MI on all FHA loans going forward (there
was always upfront MI). But, now there is MI no matter how much is put down, even over 20%
down, effective with new loans from assigned April 1st, 2013. Of course
most go conventional if they have 20%+ down, but there were scenarios
where some might have opted for FHA due to easier guidelines than conventional, but it will
be more difficult to do those loans now. Also, if you did a 15 year
fixed FHA before, there wasn’t monthly MI, however… now there will be.
* And a big one, effective with new loans assigned after June 3rd,
2013, monthly MI will not be cancelable any longer on FHA loans. It will
be there until the loan is paid off. OUCH!!!