The US Department of Housing and
Urban Development (FHA) has decided to change its policies as it relates to the
length and amount of Mortgage Insurance a borrower must pay for holding a
mortgage. This new policy is effective April 1, 2013 for Mortgage Insurance
Premium increases and June 3, 2013 for length of the Mortgage Insurance one has
to pay.
Now there are benefits of an FHA loan:
Minimal down payment of 3.5% (Which can be gifted), underwriting guidelines
that are not too strict, and lower fico scores to qualify (This can depend on
the lender). However, the idea of paying for mortgage insurance for a minimum
of 11 years may deter many ready and willing first-time home buyers. The 11
years is a minimum as long as you have 10% as a down payment. For anything
less, you will be paying the mortgage insurance until the end of the mortgage
term.
Many first-time buyers are going to
make the decision of holding off until they can save a higher down payment or
take advantage of low real estate values and eventually refinance (if it makes
sense) to justify a lower payment. We are in the early stages of an economic
recovery and housing has certainly been a topic of discussion in leading the
recovery but introducing a more expensive way to procure a loan does not help
with one of the country’s biggest markets. For details on the FHA loan changes: http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf
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