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FHA Loan Changes Effective June 3, 2013 Keeps USDA Loans More Affordable

June 7th, 2013 by Sean Stephens

Another FHA Loan Change for 2013

The latest Federal Housing Administration has announced a new change that impacts the duration of mortgage insurance premiums (MIP). This new FHA loan change is effective June 3rd 2013, and impacts the duration of FHA mortgage insurance premiums. Watch this week’s video to find out how the latest FHA changes can affect you and what affordable options are available.

FHA loans with a 30 year term and down payments of 10% or less will be affected and keep in mind most loans are taken out with the traditional 3.5% down. The new change states, “FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.” There are other changes which impact a variety of situations so we recommend reading the full HUD mortgage letter.

This new FHA change requires the higher cost to be for the life of the loan and impacts home buyers with lower down payments. When you combine this change with the recent FHA monthly increases affordability is greatly impacted, thus increasing borrowing cost drastically.

As an alternative, the USDA Program has an Annual Premium that is currently over 3X lower than the FHA monthly charge. On top of it all, a USDA loan requires NO down payment and the ability to finance closing costs when the appraised value is higher than the sales price.

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