First-time homebuyers and other buyers applying for a mortgage insured by the Federal Housing Administration (FHA) should be aware of a change to FHA loans beginning April 1, 2013.
A quick review – when buyers borrow through the FHA, they are required to pay mortgage insurance in two ways. The first, the upfront mortgage insurance premium, is a one-time fee that borrowers pay at the beginning of the loan. The second, the annual mortgage insurance premium, is paid monthly.
Under the changes, the upfront mortgage insurance premium will not change. It will remain at 1.75% of the loan amount.
However, under the new rules, there will be changes made to the annual mortgage insurance premium. On most FHA loans, this annual premium will increase by .10 percentage point. This will be an increase of $100 per year for each $100,000 in loans. Meanwhile, borrowers with loans greater than $625,000 will see their annual premium increase by .05 percentage point – an increase of $50 per year for each $100,000 in loans. These changes will be effective on loans with case numbers beginning April 1 or later, so borrowers hoping to avoid the increase should apply with their lender as soon as possible.
Remember, the annual premium depends on the loan’s size and terms. Together, buyers can work with their REALTOR® and mortgage consultant to see how these changes will affect their buying power if they borrow after April 1. Contact an Edina Realty agent specializing in your area today to get started.