As we approach the spring market in 2013 there is one change
that is not getting enough attention. That is that FHA is increasing its
mortgage premium on loans after April 1, 2013. In essence you will be paying
more for the same house if you go under contract after April 1, 2013 than if
you do before April 1st. According to a bulletin put out by the Housing and
Urban Development Program it will increase by 0.10 basis points.
So what do 0.10 basis points account for on a home loan? Well, for every $100,000 that you finance the yearly mortgage insurance premium you pay will increase by $100 a year. In essence your payment will increase by $8.33 a month. It may not seem like a lot but over the course of a loan it can add up pretty quick and affect the amount you can finance and borrow in the future as well.
The other change that is going to have even a more dramatic impact on home buyers is the term of the mortgage insurance premium. Currently you paid the premium for at least five years or until you hit 78% loan to value ratio in your home. So you were paying this for five years if you had enough equity after that time to have it removed you could have it taken off and your monthly payment would decrease by that amount every month. Currently it is at 1.25 basis points and increasing to 1.35 basis points on April 1, 2013.
That change I explained above. But the impact on your monthly payment is $112.50 a month. Under normal circumstances you made your payment on time every month you would on average be able to remove it around 10 years by just making the regular monthly payments. Now they will be paying for it for life of the loan. So you will be paying this premium for the life of the loan now in most cases.
Their reasoning is that they are still liable for the loan even after it hits the 78% mark and this is a way for them to recoup some of their losses and reduce their risk while providing homebuyers with an affordable option to buy a home.
Realtors and mortgage brokers have talked about now being the time to buy a home. If you are considering using FHA for your loan then you may want to seriously consider looking and getting under contract with a case number before the 3rd of June.
Coldwell Banker United