Coming soon – FHA changes


I’m sure no one saw this one coming (lots of sarcasm here).

For the past several years, FHA has annually increased their monthly mortgage insurance. Toward the end of 2012, as posted here on this blog, FHA was given the approval to dramatically increase their monthly mortgage insurance. It seems the probable increase isn’t going to be that bad.

The actual proposed changes include increasing the monthly mortgage insurance from 1.25% of the loan amount annually to 1.35%. That isn’t a huge change. The BIG change is this…

Currently FHA mortgage insurance falls off once a borrower has paid at least 60 mortgage insurance payments AND has 22% equity in the home. Moving forward FHA loans could require mortgage insurance for the life of the loan. If approved, it doesn’t matter how much equity you have in your home, you’ll be paying mortgage insurance as long as you have the mortgage.

That is a dramatic change. Why would FHA be considering a change this dramatic? As with most things in life, it all has to do with money.

Also discussed on this blog, FHA exhausted its reserves toward the end of 2012. This doesn’t mean FHA can’t function. What it means is they don’t have the reserves the government say they “should” have  based on the amount of FHA loans they have financed. FHA is still funding loans and running its day-to-day operation. They are just lacking reserves.

Well, one way to get rid of this problem is making mortgage insurance payments never go away. That would certainly help. It isn’t official yet, but once FHA officially announces their changes, I’ll be here to update you.

In the meantime, if you are thinking of buying a home and needing to use an FHA loan to do it, now is the time to get going. We don’t know the exact changes, but we know the terms will be worse than they are today. If you are buying a home in Georgia, contact me to get the prequalification process underway.


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One Response to “Coming soon – FHA changes”

  1. FHA changes officially announced « The Mortgage Blog Says:

    […] I mentioned earlier this month, FHA has indeed announced changes to their guidelines. While FHA was approved by Congress to […]

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