FHA to Increase Annual Mortgage Insurance Premiums

Come September 7th, the FHA will be increasing the annual mortgage insurance premiums for FHA loans to 0.85% or 0.9%, depending on the loan-to-value ratio of the loan.  In addition, the upfront mortgage insurance premium will be reduced to 1.0%.  In most cases this will result in an increase of $38/month for the average homebuyer using an FHA loan.  Why the increase?  According to the FHA, the fees are necessary to help replenish the FHA capital reserves fund and to ensure the continued availability of the FHA loan program.

With all the news regarding the FHA and interest rates and loans to save homes from foreclosure, it will be interesting to see how this all plays out by the end of the year.

Possible Relief for Underwater Homeowners...FHA Short Refinance Option

Whether you're upside down, over your head, or in the FHA's eyes "underwater" in your home mortgage, the future may look a little brighter come September.

The FHA released details recently on its Short Refinance option to help those homeowners who owe more than their home is worth.  Starting September 7, 2010, the FHA will offer certain "underwater" non-FHA borrowers the chance to qualify for a new FHA-insured mortgage...as long as you are current on your existing mortgage and the lender agrees to write off at least 10% of the unpaid principal of the first mortgage.  In addition to that, you must also meet the following criteria:

• Must qualify for new loan under FHA underwriting requirements
• Must have a credit score equal or greater than 500
• The property must be the homeowner's primary residence
• The refinanced FHA loan must have a loan-to-value ratio of no more than 97.75%

The program is meant to reach out to those individuals that fell "underwater" due to the large declines in home values in their local markets, it should provide some much needed relief and help the government stabilize the market through the next two years.

To see if you may be eligible, contact your lender or mortgage professional.

What is an FHA loan?

Back in the 1930's, the housing industry was flat.  Two million workers had lost their jobs, mortgages were hard to qualify for and satisfy, and only four in ten households owned homes.  (Sounds eerily familiar, huh?)

In 1934, Congress started the Federal Housing Administration (or FHA) to help families buy homes by insuring the loans that the banks offer to buyers.  This, in turn, allowed the banks to offer lower rates with minimal risk of losing money.  Since then, the FHA has insured over 34 million home mortgages.

With FHA loans:

• Your down payment can be as low as 3.5% of the purchase price;
• Most of your closing costs and fees can be included in the loan.

There are also many different applications for FHA loans:

• Help make your home energy efficient;
• Help you purchase a home in a rural area;
• Include the cost to repair a "fixer-upper";
• Help you re-build your home if you have been hit by a disaster.

If you are looking to purchase a home in the Kansas City area and have questions about FHA loans, feel free to contact me!