As you may know, a main advantage of an FHA home loan has been the ability to buy a home with a small down payment, borrowing up to 96.5% loan-to-value (LTV) of your home’s purchase price and as much as 97.75% for a rate/term refinance, so long as you purchased costly private mortgage insurance (PMI) . Until now, that insurance could be eliminated from your monthly mortgage payment once you reached 22% equity in your home or 78% LTV…but no more! After June 3rd, you must pay PMI for 11 years, if you put 10% or more down. If you put less than 10% down, you will pay PMI for the life of the loan!
With the FHA’s Mutual Mortgage Insurance Fund announcing a deficit of over $16.3 billion for fiscal year 2013, these changes are necessary to maintain the FHA’s mandated reserve requirement. That translates into loans and payments that are more expensive for consumers.
These tougher FHA rules have made the Ultimate Advantage Loan even more attractive! In a recent side-by-side example of a $210,000 home purchase with an approximate 96.5% LTV, the Ultimate Advantage Loan saved nearly $193 per month ($2,316 per year). Now that added cost for the FHA loan will continue for the entire life of the loan.
Email or call me to see the details of that comparison or to learn more about the Ultimate Advantage Loan. (The comparison assumed a 3.875% note rate for the loan. Not all borrowers will qualify for this loan program.)
Gary King, MBA