The House of Representatives voted and passed 406 - 4 the ability for the Federal Housing Administration to increase the annual renewal for the mortgage insurance charged on an FHA loan. Read the article here - FHA Changes Article..
Earlier this year, FHA raised the upfront Mortgage Insurance Premium from 1.75% of the loan amount to 2.25%, costing a homebuyer an extra $1500 on a typical $300,000 mortgage amount.
The vote would allow FHA to increase the annual renewal to a maximum of 1.55% of the unpaid balance. The annual renewal is paid on a monthly basis with the mortgage payment by dividing the amount due by the twelve monthly payments. How much of a change would this be to the home buyer? On a $300,000 loan balance the consumer would pay $137.50 per month for mortgage insurance. In the worst case scenario of 1.55% it would cost the same home buyer $387.50 per month.
A recent study that asked people hat bought homes over the past year what relevance the tax credit had on their decision to purchase. 65% said it had no bearing on their move to home ownership. The majority of these same people stated it was the low interest rates that enticed them to buy. I'll take this a step further and suggest what they really mean is they bought because of the affordability or the low payments due to the low interest rate environment.
An increase in the mortgage insurance at these levels would effect the affordability of homes in the market thereby decreasing the values of housing stock.
HUD Secretary Shaun Donovan made a statement regarding passage of HR 5072 - Click for statement.
If you are on the fence about when the right time to buy is, I would jump off asap. Rates are low now and if FHA goes to the max allowed for MI, it's the same result to your payment as if interest rates jumped 1.25%! For a calculation comparing this, email me and I'll return it to you.
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