As a notice for buyers, mortgage insurance will increase after April 1, 2013. Even more significant changes will take place beginning June 3rd, 2013.

FHA home loans have been the mortgage financing of choice for many consumers with small down payments and also offered more options for those with lower credit scores. FHA backed loans have been one of the most common loans in the Pearland, Friendswood&Bay Areas of Houston.

For a buyer using an FHA loan, the monthly basis points will increase by 10 on April Fool's Day, that is $200 per year on a $200,000 loan or an estimated $13 per month on the average US home price. 

In addition, a more staggering increase will occur on June 3, 2013 when FHA’s policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term. The current policy of terminating mortgage insurance payments completely at a 78% loan to value ratio or after 5 years will expire on June 3.  Mortgage Insurance will now carry through to the end of the loan term in most cases. Even a 15 year loan with a beginning loan to value ratio of <78% will have 11 years of mortgage insurance!

While the monthly expense seems minimal, the interest expense over time (say, 15-30 years?!) will be substantial.

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For homeowners that expect to stay in their home for ten years or less, the new changes might not have much financial impact. Homeowners who expect to be in their home long term can refinance with a conventional loan without mortgage insurance once the equity has increased due to amortization and appreciation.
 
For buyers to avoid these increases, they will need to act now to get the FHA commitment issued prior to these change dates.

Does your timeline allow you the option to purchase a home before April 1? Call me today to schedule a property tour in Pearland, Friendswood or other Houston Areas.