FHA Gives Homebuyers One Month Window
Colorado Springs, CO – “The Federal Housing Administration (FHA) is giving homeowners and buyers until October 4 to lock in a low monthly insurance premium,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. “After October 4, the monthly insurance premiums on FHA loans will increase by over 63%.”
What does this mean for homebuyers?
A homebuyer purchasing a $200,000 home using a $193,000 FHA mortgage before October 4 would pay an insurance premium of $88.46 per month. If the same homebuyer waits until after October 4, the insurance premium would jump to $148.01. “In this example, the homebuyer would lose $59.55 per month, or $7,146 over a ten year timeframe,” Nicholas said. “Although the upfront mortgage insurance premium is going down after October 4, the real impact to the homebuyer is actually a net increase in their out of pocket costs because the monthly premium is going up by 63%. Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket. On the other hand, the increase in the monthly premiums will be paid right out of the homebuyer’s pocket with their mortgage payment each month.”
Ironically, homebuyers who plan to be in the mortgage for less than 3 years and decide to pay the upfront fee themselves (instead of having the seller pay it for them), may actually save money by waiting until after October 4 to apply for an FHA loan. “Homebuyers with a short term time horizon may actually benefit from this change because the upfront premium will be reduced to 1% from 2.25%,” Nicholas said. This change will impact over 30% of the homebuyers in today’s market who use FHA-insured financing.
Provided by Sterling Campbell.
Homebuyers considering an FHA loan can call Sterling Campbell, CMPS at (719) 535-8723 or email at SterlingC@aafcu.com to discuss their options and what this means for their situation. Also, you can follow CMPS Institute on Twitter to stay updated on these and other mortgage and housing industry developments.
Sterling Campbell
Certified Mortgage Planner
Air Academy Federal Credit Union
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