Friday, April 20, 2012

Today in Lending

Very recently there was yet another change by the Federal Housing Administration (FHA) that you want to know about if you are considering using FHA to buy a home in the future.
FHA, which has been around since 1934 is basically a government (Department of Housing and Urban Development (HUD)) entity which insures lenders money in cases of loss from default. FHA allows for financing of up to 96.5% of the purchase price of a home or appraised value whichever is lower.
On April 9th the FHA increased its fee structure which gets passed along to the borrowers who use them. FHA charges a one time fee known as Upfront Mortgage Insurance Premium which is increasing from 1% of the loan amount to 1.75%. So for instance on a $100,000 loan request the fee used to be 1% of that $100,000 which translated to a $1000 fee, but now in the same scenario it is 1.75% of the $100,000 loan request translating to a $1,750 fee.
Along with the Upfront Mortgage Insurance Premium, FHA also charges a monthly Mortgage Insurance Premium that is collected with your monthly payment and these premiums too are rising. Premiums on a $100,000 loan request prior to the recent change had an estimated $95.83 monthly mortgage insurance premium, but today that premium would increase to $104.17. Less then a $10 increase for that scenario but the difference becomes more prominent as the loan request increases. Historically, it was just about a year ago (April 4th, 2011) when FHA last increased their premiums.
FHA still offers a great way to buy a home with little money down, but Ocean Communities FCU has some other great products where costs could be much less for you. I suggest you contact one of our experienced mortgage loan officers and ask about our CU Promise Products which offers more features you will enjoy outside of the costs savings.

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