In an effort to strengthen the Federal Housing Administration, new lending rules are to be rolled out April 1, 2013.
FHA Mortgage Changes
Currently, owners with more than a 78 percent loan-to-value ratio pay 1.25 percent of the loan amount for insurance, which is included in the monthly mortgage payment. When the new rules go into effect, the insurance will increase to 1.35 percent for loans less than $625,500 and to 1.75 percent for loans of more than $625,500.
Additionally, for those with a loan-to-value ratio between 78 and 90 percent, monthly mortgage insurance is required for 11 years or until the home is sold or paid in full. If the loan-to-value ratio is more than 90 percent, the home owner will pay insurance for the life of the loan, rather than having the insurance canceled once the owner hits a 78 percent loan-to-value ratio.
While an FHA mortgage is becoming a more expensive path to home ownership, it’s still the best option for borrowers with little money for a down payment.
Contact On Q Financial, Inc. today to learn about our FHA mortgage products.