Mortgage application with a house keychain and keysIn the coming months, prospective Phoenix home buyers will see a variety of changes to FHA loans and lending. There are two dates to keep in mind if you’re thinking about purchasing a new home, including one in just a few weeks on April 1st. Here’s a quick breakdown of the changes that are on the horizon for FHA loans.April 1: For nearly all new FHA loans issued on or after April 1, borrowers will pay an additional one-tenth of a percentage point (.10%) in mortgage insurance each month. A letter from the U.S. Department of Housing and Urban Development (HUD) to lenders on January 31, 2013 stated the following:“Consistent with FHA’s ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is:
  • revising the period for assessing the annual MIP;
  • removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and
  • increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009.”

What this means is if a borrower takes out a 30-year, $500,000 loan and makes the FHA’s mandatory 3.5% minimum down payment, they will be responsible for a 1.35% mortgage insurance premium versus the 1.25% rate of today. That equates to about $562 per month in mortgage insurance for the buyer in this example versus the approximately $520 they would pay today.

June 3: Additionally, starting June 3, an FHA borrower must carry mortgage insurance for the life of their loan. This is a big change from today’s rules where borrowers can drop the premium once their loan balance reaches 78% of the original loan amount. Other June changes involve a mandatory manual underwriting by the lender to evaluate the borrower’s qualifications for applicants with a credit score below 620 and a total debt-to-income ratio of over 43%.

For assistance with all of your Phoenix real estate needs, please contact me. I’m a local real estate agent who would love to show you around.