Change Can Be Good

 

Change is often viewed with trepidation and pessimism. The same is often said about our government; but, every once in a while, change is good.  And, when it is initiated by our government, it is shocking!

 

Today, the FHA, a governmental entity, announced that, effective January 26^th of this year, they will be lowering the monthly fee for Private Mortgage Insurance (PMI). http://20somethingfinance.com/what-is-private-mortgage-insurance-pmi/

 

When the banking crisis hit, part of the government response was to raise the fees associated with providing this loan. An FHA loan is characterized by a lower rate down payment than a conventional loan.  But, as with all things, you have to give a little to get a little. The government gives these loans, but their fees are a higher than most loans that require PMI. 

 

A typical FHA loan has a 1.75% upfront fee, paid at the time of close, on its loan (it can be wrapped into the loan).  In addition, this loan has PMI. When the banking crisis hit, the default rate on FHA loans rose dramatically and losses had to be recouped. The monthly PMI rate rose to 1.35% of your monthly payment, deemed necessary to insure the risk involved in lending on this program. 

 

But, here comes the good news:  Beginning January 26^th, the monthly rate is dropping from 1.35% to 0.85%. That can add up to significant savings over the life of the loan!! The reason?  Actuarial tables show that borrowers are defaulting less, making the need to collect insurance less expensive, simply put. The tables are reexamined on a regular basis, but today’s announcement is welcome news. http://www.housingwire.com/articles/32533-its-official-obama-to-direct-fha-to-cut-mortgage-insurance-premiums

 

Here is a tool to roughly help you understand a payment for a loan financed by an FHA loan: http://www.fha.com/calculator_payments  Of course, everyone’s situation, rates, and process to qualify will vary depending on individual circumstances, but this can be a starting point. 

 

Not only does this make qualifying less expensive, it also allows more borrowers to qualify.  In addition, interest rates still remain at historic lows.  An FHA loan might be as low as 3.75%, depending on your individual situation.  Seek information from an experienced FHA lender.  I work with Camille DuPuis: 

Camille DuPuis Princeton Capital 1096 Blossom Hill Road Suite 200 San Jose, CA 95123 408-445-5179 camilledupuis@princetoncap.com

 

I am experienced in, and enjoy, working with first time buyers, whether you are financing with an FHA, or conventional loan.  I am in the field every day, viewing properties as they come on the market.   I speak to listing agents and sellers, gathering information to help my clients gain an advantage in this current competitive market.  If you feel you would benefit from my services, give me a call!