In today's real estate market, many buyers are opting for the FHA route for obtaining their mortgage. FHA loans are different from Conventional loans in many ways, mainly an FHA loan is a Government loan that only requires a 3.5% down payment and a Conventional loan isn't, and it requires a minimum of 5% down payment. Last year, the fees and Mortgage Insurance Premiums (MIP) had a change in their calculations. This caused many home buyers to be priced out of the market with their payments going up considerably.
As of April 1, 2012, FHA has yet again, changed their fees and MIP calculations. This change shouldn't price people out of the market, but there is a difference in payments that will make people say, "I'm paying how much more for the same house because of fees?"
After April 1, 2012, the Up Front MIP will go up to 1.75% of the loan and the Monthly MIP will be calculated on 1.25% of the loan. What does this mean?
At $150,000 - Today's 3.875%, the mortgage payment will increase approximately $18.
At $200,000 - Today's 3.875%, the mortgage payment will increase approximately $24.
At $250,000 - Today's 3.875%, the mortgage payment will increase approximately $31.
You might think it's not that big of a deal for an extra $20 here or $30 there, but it's a MONTH! That's $240 here or $360 there a year! It adds up. Now, multiply that out over 30 years. My daughter's dance class is $700 a year, and her swim lessons that she's starting in a couple of weeks are $780 a year. I'm struggling to justify those expenses as she's only 4. The increase is about half her dance class. Do you have kids doing extracurricular activities? How much do they cost, and will this increase impede into that budget?
After April 1, 2012, you don't have any choice but to accept these terms if you're obtaining an FHA loan. However, prior to that date, you have a choice. As long as you start the loan process prior to April 1, you're in the clear. You do NOT have to close on a house prior to April 1. That means, if you're thinking of buying a house in the next couple of months, and you're going to go the FHA route, you need to get pre-approved for your loan in the next month. Today is March 1 and there are 31 days in March. Let's get going! Get off the fence and keep some extra money in your pocket instead of waiting until after this important deadline!
If you're looking to buy a house in the Austin TX area, please contact me TODAY so we can get you approved now!
**There are other changes that effect other markets with loan limits over $625k, but the Austin area has a max FHA loan limit of $277k, so those higher priced issues do not effect my market.
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Copyright© 2012 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
* FHA Increases Their Up Front and Monthly Mortgage Insurance Premiums April 1 2012 - How Does it Effect You? * was first published on donnahomesblog.com.