FHA Loans A Good Thing?
You may have seen recent headlines about the Federal Housing Administration needing a taxpayer "bailout"… the good news for FHA's traditional borrowers is that people with limited cash for down payments and less-than-perfect credit history the answer is no. In the meanwhile, FHA is making tweaks to their program rules that could affect some loan applicants in the months ahead, and which are improved to cut back on losses and improve revenue flows.
Among the most immediate changes, new borrowers early this year:
1. Will likely be charged slightly higher annual mortgage insurance premiums – 1.35% of the loan balance rather than 1.25% at present.
2. On loans above $625,000 in high cost areas such as California and metropolitan Washington, D.C., the annual premium will go from 1.5% to 1.6%. This will not be a major problem for most people, but it could cost some buyers to check out the competitors of FHA's.
3. To increase revenue streams long term, FHA is also abandoning its practice of allowing borrowers to cancel their annual mortgage insurance premium payments when their loan balance drops to 78% of the property value. In effect, this will mean that borrowers obtaining 30-year FHA loans could be paying premiums for decades. This is NOT good.
The bottom line on FHA's forthcoming program tweaks is that the FHA isn't making any fundamental changes. It's a basic mix of enticements; Low down payments, low credit score requirements, and generous underwriting rules aren't going away.