FHA rules are set to change on April 1 and then again in June. The new rules on April 1 will impact the cost of the mortgage insurance (MI) paid on the home loan, increasing it from 1.25 percent to 1.35 percent. On June 3, the monthly MI will remain part of the payment for the entire term of the loan.
If this seems daunting, real estate agent Pam Burzynski of Bethlehem, Pennsylvania breaks it down,
Let’s think about the REAL effects of this change for a moment. On current FHA loans the MI stays in effect for 5 years OR until the LTV of the loan is at least 80%. On a standard $200,000 amortization at 3.75% interest and making only the minimum payment each month, the 80% mark is met 9 years and 3 months later. In order to reach 80% in 5 years on that loan, the buyer would need to pay about an additional $300/month each month. Now keep in mind, this is the same buyer who needed to utilize the “minimal down payment, seller assist, lenient credit requirements, or higher debt ratio allowance”—so one would logically assume that an additional $300/month would not be practical.
Perhaps it’s just a mind thing, then. On the other hand, $300 more for the entirety of the loan does seems pretty hared to swallow!
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