FHA moves to Risk-Based Pricing

By
Real Estate Broker with Prudential Real Estate Professionals

When it comes to mortgages, one piece of important news got little fanfare. The Federal Housing Administration announced that it will charge higher mortgage insurance premiums to riskier borrowers and lower premiums to safer borrowers, starting in mid-July.

 ribbon house

This will actually be better for good credit borrowers. Right now, the FHA charges the same to everybody in its most popular program. Everyone pays an upfront mortgage insurance premium of 1.50% and in addition to that, an annual mortgage insurance premium of 0.50% calculated on the base loan amount, which is paid monthly in the housing payment.

 

For example, on a base loan of $100,000, the upfront FINANCED mortgage insurance premium is $1,500 (making the total loan $101,500) and the monthly mortgage insurance premium is about $42.

 

FHA has always charged the same upfront mortgage insurance and monthly mortgage insurance premium on all FHA loans. STARTING JULY 14TH, THE PREMIUMS WILL VARY, DEPENDING ON CREDIT SCORE AND LOAN-TO-VALUE RATIO.

 

For example, someone with a "low" credit score of 580, borrowing more than 95% of the home's value will pay an upfront premium of 2% and an annual premium of 0.55%. This will be more than FHA borrowers in this credit range are paying now.

 

People with "higher" credit scores will benefit, though, because their premiums will go down. Borrowers with credit scores of 680 or above will pay an upfront mortgage insurance premium of 1.25%. The annual mortgage insurance premium will remain at 0.50%. Those people borrowing more than 95% of the home's value, will be paying 0.55% annually.

 

According to FHA commissioner Brian Montgomery, nearly 25% of FHA borrowers have credit scores of 680 or higher. Of that 25%, most of the borrowers are putting down the minimum down payment of 3%. It appears that 75% or more of FHA borrowers will be experiencing a change in the cost for FHA financing.

 

This information is provided by Ann Shipley of Reliance Mortgage
Ann can be reached at 503-559-6493 or ann@reliance-mtg.com

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Mortgage Rate Trend

The results are almost evenly split: 40% of the mortgage experts think rates will rise, 30% think rates will remain unchanged and 27% think rates will go down.  No strong trend is evident.
Source bankrate.com

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If you have questions about FHA financing or buying a home in the Mid-Willamette Valley, please call:

Leslie Stewart, Realtor, CRS
The Brenda Bonebrake and Sandy Edwards Team
Licensed Broker in the State of Oregon

Prudential Real Estate Professionals
1155 First St, Stayton OR 97383    503-769-3448     800-423- 7740    LeslieS@prurep.com

Do you have a mouse in your house?  If so, log on to www.BrendaAndSandy.com

Proudly serving these Oregon communities: Salem, Albany, Aumsville, Lebanon, Jefferson, Turner, Sublimity, Stayton, Silverton, Lyons, Mill City, Gates, Detroit, Idanha, and Silverton. 

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Leslie Stewart, CRS, eCertified, Licensed Oregon Broker

Now More Than Ever, Experience Counts! 

 Prudential Real Estate Professionals, Bonebrake and Co LLC, The Brenda Bonebrake & Sandy Edwards Team
1155 First St, Stayton Or 97383     w503-385-0033  

 

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