Perhaps you have heard already that the FHA will further change its overall look in the coming year. I’ve already started to see Facebook comments about FHA and many of them are just rumors. The truth can be described easily as it applies to the real estate industry:
1) The Annual Mortgage Insurance Premium (MIP) is going to go up by 10 basis points = 24.13/monthly for a purchase of 300,000. That means your buyer will qualify for about 4,500 less than before if he/she was buying at their absolute maximum.
2) FHA Mortgage Insurance will return to being a permanent part of any FHA loan. In the last few years FHA had allowed for the MI to simply drop off (after 7 years) or be requested to have removed (after 5 years if the equity was there). Who remembers when that was the case before? This means for the borrower that they will need to refinance out of the loan entirely if they want to get rid of the MI.
Bottom line: FHA needs the money. They are in a 16.3 Billion Dollar hole. They are also technically out of compliance with their charter, which requires them to have a 2% reserve amount at all times. Something they have not had for 4 years now.
More may be in store but for now that’s it! Not much to it.
Some good news? RATES are expected to hold at relatively low levels in 2013!
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