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Joe Metzler, MLO. NMLS #274132

FHA loans more costly after June 3, 2013

Wednesday, May 8, 2013 - Article by: Joe Metzler, MLO. NMLS #274132 - Cambria Mortgage - Message

FHA Loans More costly after June 3, 2013
Minneapolis, MN: FHA loans are having another change starting June 3rd, 2013. The change comes in two areas:

1) Monthly mortgage insurance is being added to some loans that previously didn't have it. For the vast majority of FHA loans, this is a change that will effect next to nobody, as most FHA loans have mortgage insurance. For example, if you had a 15-yr FHA loan, and you put at least 22% down, you currently wouldn't have PMI. Under the new rules, you will.

2) FHA mortgage insurance, which currently goes away once your loan reaches 78% loan-to-value, will now be on most FHA loans for the entire term of the loan. Here is a quick breakdown of the new mortgage insurance guidelines:

FHA Mortgage Insurance (PMI) CANCELLATION - ALL FHA loans after June 3, 2013

  • UNDER 90% loan-to-value at START of loan: 11-years
  • 90% loan-to-value of higher at START of loan: Life of loan - never goes away

While this sounds terrible, two items jump to my mind:

  • Whenever possible, try moving to a 5% down conventional loan. Just a little more out-of-pocket will currently save you a LOT of money in PMI monthly,AND it can still go away as early as 80% loan-to-value.
  • Standard FHA loans with just 3.5%, on average, will have PMI for about the first 10-years anyway. So for most people, the new life-of-loan mortgage insurance on FHA loans is meaningless unless you are still in the house after 10-years.

As always, contact a local LICENSED mortgage professional to assist and answer questions. Don't assume.

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