If you are currently looking for a home and plan on using an FHA loan, get a case number now as some new changes take effect on October 4, 2010. See the hypothetical example below:
The bright side? If you are looking at an FHA loan with a value of $250,000, the Upfront Mortgage Insurance Premium is decreasing from 2.25% to 1%. This will bring about a $3000+/- savings in closing costs!
The not-so-bright side? If you borrow more than 95% of the value of the home, your monthly payment is going to go up. For example, TODAY, a loan for $250,000 at 4.5% will give you a monthly payment of $1381.58 (principal+interest+PMI). After October 4th, your monthly payment will be $1454.50. The payment increase isn't huge, but it will affect those buyers trying to qualify for a larger loan amount. On the flip side, if you borrow less than 95% of the value of the home, the payment will increase from $1381.58 to $1433.67 on the 4th.
In addition, borrowers with a credit score at or above 580 will be eligible for maximum financing. Those between 500 and 579 will be limited to 90% LTV. And those below 500 will not be eligible for FHA-insured mortgage financing.
This is just a brief summary of the new changes that will take effect. For more info, speak to your mortgage lender and/or visit these HUD guidelines.
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