More potential changes to FHA loans

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I’ve thrown up a posts over the past couple of months (here and here) about potential changes for condo purchases using FHA loans. How about a change on FHA loans that is beneficial for everyone!

A new bill working its way through Congress would make mortgage insurance for FHA more like mortgage insurance for conventional loans.

Currently, FHA mortgage insurance is permanent unless the buyer makes a 10% down payment. When making a down payment as large as 10%, often buyers use a conventional loan. Maybe there is a case where someone still wants to do an FHA loan (for example, a foreclosure 3 years ago is OK on FHA loans but not OK for conventional loans), but often 10% down means a buyer is using a conventional loan for their purchase.

With FHA’s current permanent monthly mortgage insurance, it makes FHA loans much less competitive with conventional loans. The new bill looks to change this situation.

If passed, the bill would change the cancellation date on FHA mortgage insurance from “until the loan is paid in full” (meaning permanent for the life of the loan) to when the loan balance is 78% of the homes original value. Meaning, the mortgage insurance is no longer permanent.

The current set up with mortgage insurance on FHA loans really isn’t fair to the home buyer. They are way over charged paying mortgage insurance for the life of the loan, and the change could make FHA loans are more viable alternative for buyers making the minimum down payment on a home purchase.

Can’t decide if an FHA is right for you? Contact me and we’ll find out! If you are buying a home in the state of Georgia, I can also get you prequalified and ready to make an offer on your new home.

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One Response to “More potential changes to FHA loans”

  1. Which Type of Mortgage To Use – Scenario 1 | The Mortgage Blog Says:

    […] Professional, Honest Mortgage Advice from Dunwoody Mortgage Services « More potential changes to FHA loans […]

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