Denver Mortgage: FHA Annual Mortgage Insurance Increasing in April - What Does This Mean For You?
As of April 18th 2011 all FHA loans will cost more per month in mortgage insurance.
What does this mean for you as a
Denver home buyer trying to decide whether or not now is the right time to obtain a FHA loan?
HUD continues to increase the cost of FHA loans. On Monday February 14th, HUD announced their decision to further strengthen FHA's Mutual Mortgage Insurance Fund (MMIF) by increasing the annual mortgage insurance premium by 25 basis points.
EXAMPLE: FHA NOW and LATER
Using 5% interest rate (this is not a rate quote and to be used for educational purposes only)
NOW
Purchase Price: $200,000
Down Payment (3.5%): $7000
Principal and Interest: $1046
Taxes: $125
Home Insurance: $65
Mortgage Insurance: $145
Total Monthly Payment: $1380
As of April 18th the mortgage insurance on the above example would increase by $40/month to $185/month. This increase in addition to the increase in October 2010 has raised the cost of FHA mortgage insurance by almost $100 more per month on a $200,000 loan.
WHAT THIS MEANS FOR FHA APPROVED CLIENTS
You must have a 1) loan application and 2) an executed contract so your mortgage loan officer can pull a FHA case number by Friday April 15th to ensure you are grandfathered into the cheaper FHA annual mortgage insurance.
Let's take a look how FHA compares to a conventional loan as of April 18th.
Remember a conventional loan requires only 5% down payment. This example will be based on a client with 700 minimum credit score.
For the below example (to make an apples to apples comparison) a 5% rate was used for both loans. This is not a rate quote (this is for educational purposes only).
FHA (as of April 18th)
Purchase Price: $200,000
Down Payment (3.5%): $7000
Principal and Interest: $1046
Taxes: $125
Home Insurance: $65
Mortgage Insurance: $185
Total Monthly Payment: $1420
Conventional
Purchase Price: $200,000
Down Payment (5%): $10,000
Taxes: $125
Home Insurance: $65
Mortgage Insurance: 149
Total Monthly Payment: $1358
This is bad news - no doubt about it. It’s a great incentive for Denver home buyers who need that extra little push to pursue an FHA loan. To get started, download our
First Time Home Buyer Report and the
FHA 203k Renovation Loan Report. Once you become an approved FHA buyer, you can opt for the
FHA 203k loan - you can learn about this loan and many more home buyer options in our
Learning Center.
