FHA home loans currently require a 1% onetime funding fee, plus monthly insurance (PMI) to be paid on all FHA mortgages. FHA has announced the costs of both the funding fee and monthly premiums are going up starting April 1st
Effective April 1st
- 10 bps increase in annual premium for single family to 1.25% (.25 bps increase for loans above $625,500 to 1.5%)
- 75 bps increase in upfront premium to 1.75% (currently 1% funding fee)
Streamline FHA Refinance Change?
There is speculation of a considerable reduction in the streamline refinance premium! It would apply to FHA loans made prior to May 2009. HUD may make an announcement in the next couple of weeks.
FHA also announced possible changed coming to their seller concession policy. This is the amount or percentage of closing costs a seller can pay for a buyer. The current cap is 6% concessions towards buyers closing costs and pre paid escrow items.
Last Thursday HUD published a request for comment (30 day period) on the proposed changes to current FHA seller concession policy. Here is a summary of the anticipated changes:
- Reduce the amount of permitted seller concessions to 3% or $6,000, whichever is greater
- Further limits seller concessions to never exceed the borrower’s actual closing costs
- Redefines what can be considered as acceptable closing costs to be paid by seller concessions to: closing costs, prepaid items, discount points, up-front MIP, and any interest rate buydown. No longer permitted are “payment supplements” such as HOA/condo fees, mortgage interest payments, and mortgage protection plans.
- Redefines “interested third party” by adding lender, mortgage broker and settlement company to the list. So any contribution by these parties must be included in the amount of seller concessions.
Remember FHA mortgages require a min 3.5% down payment, plus the cost of any closing costs the sellers is not paying. Closing costs and pre paid escrow items are generally 3-5% depending on the purchase price of the home.
Buyers located the outlying areas of Florida may also want to look closer at the 100% USDA home loan. USDA Rural Housing offers 100% financing in select locations with minimal mortgage insurance. You can learn more about the NO money down USDA loan by visiting www.UsdaMortgageSource.com
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