New: Three Important FHA Changes…

I wanted to take a minute and make sure you understand three important recent changes to FHA loans…

1) As of April 1, 2013 annual mortgage insurance premiums have gone up.

a) For 30 year loans over 95% LTV = 1.35%.
b) For 30 year loans under 95% LTV = 1.30%.
c) For 15 year loans between 78% and 90% LTV = .45%.
d) For 15 year loans over 90% LTV = 70%.

2) MIP Term changes with FHA loans starting June 3, 2013: The Federal Housing Administration also made a second MIP-related announcement — the agency is reversing its policy which allows FHA-backed homeowners to cancel mortgage insurance premiums once the outstanding principal balance of an FHA loan reaches 78 percent of the original balance.

Going forward, the FHA will disallow the removal of MIP throughout the life of a loan, if the loan’s starting loan balance is higher than 90% of its appraised value. This is true for purchases and refinances.

For loans in which the loan-to-value begins at 90 percent or less, mortgage insurance premiums must be paid for 11 years. This change goes into effect June 3, 2013.

3) Other changes…

For FHA loans with credit scores lower than 620 and debt to income ratios higher than 43% – now requires a manual underwrite. This will result in few people being able to qualify for FHA loans in this circumstance.

That’s it for today!