subject: Changes That Will Affect Your Monthly Payment [print this page] Changes That Will Affect Your Monthly Payment
As the industry changes, so do the rules. I cant imagine that anyone is every completely satisfied with anything that we have done in this world so far. But, I will say that over the past 19 years, things just keep dramatically changing just when I think that they have settled down. Now, one of the things I wasnt sure about is happening in fact, and can affect you differently depending on your home loan. Its the upfront Mortgage Insurance changes coming to FHA.
The changes are easy for me to understand, but you may not understand if your mortgage professional doesnt explain them to you. So, what you need to know I will tell you right here. If you are looking to buy but you have been on the fence, then the Mortgage Insurance changes coming to FHA just might change your mind. First, I am going to explain to you how mortgage insurance premiums are calculated on your loan.
When buying a home using an FHA loan, you can put as little as 3%, with a credit score of 620 or higher. So, if you are putting down 4.99% or less than your upfront Mortgage Insurance premium was 2.25%. Your monthly would be 0.50%. So, lets say that you wanted to borrow $100,000 to buy your home, and you are wanting to do a 30 year loan. Lets say in this case that you are putting 5% down on the home. In order to calculate your monthly mortgage insurance premium, you need to first calculate what it is upfront. So, you will look at the percentage you will pay up front, which for our sake in this example is 2.25%. When you multiply this by $100,000 by 2.25%, or 100,000 x .005 = $500. When you divide that $500 by 12 months, it equals $41.67 per month. So, that tells you what your monthly payout is.
The changes coming to FHA mortgage insurance premiums, mean that your upfront Mortgage Insurance Premium will go down to 1%. However, the monthly insurance premium would go from .55 to .9. This can change things dramatically. The larger the loan amount is, the bigger the dollar difference. So, to show you the difference, lets use those same numbers we used previously. When your mortgage is 1%, then your mortgage insurance is .9 on a monthly basis. When you multiply $100,000 by .009 = $900. When you divide the $900 by 12 months, it equals $75 per month. So, the difference in payment is $33.33. When you consider that you pay $33.33 more per month in the course of 12 months it changes your outlook. You can see that you are paying just under $400 more per year, so it adds up over the life or your loan. Most families have a 30 year loan, and within 5 years they have paid down enough into the loan to drop the mortgage insurance. So, over 5 years that an extra $2,000.
Hopefully this helps to put this in perspective. The changes were delayed to give everyone time to get things together, but I am sure there may be more changes. The thinking behind this was to help the FHA recover its deficit. This certainly will help, and that is a lot of loans. All the new purchases coming up once that date hits will be effective. Today is the day move on it if you havent already.
For more information, you can go to www.fhaloansnow.net. You can fill out a form to get pre-qualified, or just call the toll-free number for more information today.
by: Mayer Dallal
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