As some of you may have heard HUD has officially announced their intention to make the following changes to the FHA loan program in Texas:
- Lower the Up Front MIP from 2.25% to 1% AND
- Increase the Annual (monthly) MIP From .50 – .55% to .85 – .90% depending on LTV
on loan terms greater than 15 years. This is scheduled to be effective for case numbers issued on October 4, 2010.
Here is how this change will look on paper:
Assuming
$100,000 base loan
UFMIP
$101,000 using the new MIP in the mortgage amount
$102,250 using the old MIP in the mortgage amount
Annual MIP
$909.00 ($75.75 Monthly) New Annual MIP based on $101,000
$562.38 ($46.86 Monthly) Old Annual MIP based on $102,250
At 5% 30 years assuming 96.5% LTV
$617.94 New
$595.76 Old
A borrower will need an estimated $75-80 more in monthly income or $900 more per year to qualify per $100,000 in loan amount. While this may sound scary it’s just another move to ensure we are properly qualifying the borrower upfront.
With all of these changes to the FHA loan program now might be a good time to consider your possibilites. Sure, if FHA is the best for you then we can put together a program to help get you out of mortgage insurance in the near future by refinancing into a conventional loan. If however you qualify for a conventiona loan then that might be the best option. The Fannie Mae HomeStyle loan, which is the conventional answer to renovation lending, requires a down payment of 5% and a credit score of at least 680. You will find that the mortgage insurance can be much less than that of FHA and best of all the mortgage insurance isn’t on the loan for the life of it. When you reach 80% loan to value or pay the mortgage down to this level you can apply to have it removed.
Having options is key to renovation lending and working with a lender who has these options is very important!
Now is a great time to get under contact to avoid being subject to these changes. Please call or email me today for more information.