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How The New FHA Home Loan Changes Affect You

The new FHA Home Loan changes went into effect on Monday, October 4, 2010. The changes to the FHA program include a reduction in the upfront Mortgage Insurance Fee, but also include an increase to the annual mortgage insurance. The result to a lot of home buyers is a lower loan amount, but an increase to the monthly payment.

FHA decided to make these changes due to the current nature of the mortgage environment and to also help reduce the loss in foreclosures. Any new FHA case number ordered after October 4 will be required to use the new FHA guidelines.

So what does this mean to a future home owners?

Ultimately, the largest change in the new FHA home loans is the annual mortgage insurance cost. This has a direct impact on the mortgage payment. The new changes will see an increase to the monthly loan payment. For example, a $100,000 FHA loan will see an increase to the monthly loan payment by $29.17. This can affect a consumer’s ability to get approved for a FHA mortgage if they have a high debt-to-income ratio.

Home Buyers with high debt-to-income ratios will need to consider paying off some debts before buying a property or consider an increased down payment to offset the increase in monthly payment.

Even with the changes to the FHA mortgages, these types of mortgages are still fantastic for first time home buyers and people searching for mortgages with low down payment options.

FHA mortgages also offer home owners lower rates and have more flexibility when it comes to seller concessions. FHA loans also offer the ability for the down payment to come from a gift from a family member or parent.

It is crucial when buying a new house that you talk to a mortgage consultant to discuss all your home loan options and see which loan program best fits your needs. Since there are many types of home loans, it is crucial to get all the information you can so you can make an informed decision.

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