ARE FHA INSURANCE PREMIUMS GOING TO CHANGE?

January 1, 2014 there was a change to the FHA insurance premiums. Are FHA insurance premiums going to change now? It used to be you would have to pay the premium for 5 years or until what you owed on loan was 27% less than the amount you borrowed. Then in January 2014 the rule changed that the monthly premium would be for the life of the loan Now the HUD Secretary Brown says FHA’s high annual mortgage insurance premiums and insurance requirement for the life of the loan pose significant challenges to qualified buyers who are being priced out of FHA or the market altogether. And he is correct! The premium varies based on amount financed, but normally in the range of $100+ to $200 per month for most FHA homebuyers. That is a lot of money over the loan! We will have to see if they change the rules back to prior 2014. I know this is a big deal for first time homebuyers as it brings down the pre-qualification amount because the lender has to take into account the insurance premium as part of the monthly mortgage payment, which means a person can’t afford to purchase as much house as without the insurance and then they are stuck with the insurance premium for the time they own the home or until they can save up enough money to refinance to a conventional loan. This is not possible for many because they are financing FHA because they only can afford to put 3.5% down and to get rid of the insurance premium the person would need to come up with 20% down to get rid of the insurance premium plus have additional funds for closing. Then you add in that anyone who has bought in the past few years has a low interest rate, and we all know the rates are going to have to be going up sometime in the near future.