On April 1st, 2013 FHA will be raising their mortgage insurance premium (MIP) by .1% and requiring it to be paid for the full term of the loan.
View the press release here.
An FHA loan created before April 1st will only require mortgage insurance until the loan is 78% of the original balance (around 7 years of payment).
Let’s see the difference between buying before and after the deadline.
$200,000 Home Before The Deadline
Monthly mortgage insurance: $201.04
7 years of mortgage insurance: ($201.04 x 12) x 7 years (average time)=? $16,887.36
$200,000 Home After The Deadline
Monthly mortgage insurance: $201.04 +.1% premium= $221.14 per month
Only $20 more per month but now let’s add in the full 30 years of payment.
30 years of mortgage insurance: (221.14 x 12) + 30 year payoff= $79,610.40
After deadline mortgage insurance $79,610.40 – Prior to deadline mortgage insurance $16,887.36 = $62,723.04 loss
So what can you do?
Either get your FHA case # prior to April 1st or look at using a 5% down conventional loan that begins with a lower mortgage insurance payment and will fall off after being paid down to 80%.
Have questions or want more information on buying or selling in Reno and Sparks contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com