Florida Connects – If you are a Realtor in Florida and working with buyers still sitting on the fence, now is the time to let your buyers know that the Federal Housing administration has announced that the cost for FHA loan is to be increased on April 01, 2012.
What does this mean for your buyers in Florida who want to finance through FHA with a down payment as low as 3.5% ?
With the new premium structure going in effect, the goal of the FHA is to strengthen Federal Housing, and in order to achieve this, FHA will increase their upfront and monthly premium insurance fees starting April 01, 2012.
On June 01, 2012 there will be an additional increase of monthly mortgage insurance premiums for high balance mortgages.
As of this time FHA loans require an upfront mortgage insurance, and the sum is added to the loan amount of 1%.
On April 01, 2012 the new upfront mortgage insurance will increase to 1.75%. This is an increase of 75% in upfront fees.
For example, on a loan amount of $100,000, the current upfront amount paid would be $1,000. After the increase goes into effect the new upfront amount equals to 1.75% and would be $1,750. This increase of $750 would be adding an additional $2.50 a month to the monthly mortgage payments.
Now don’t forget the monthly insurance premium will increase as well. Right now the insurance premium is 1.15% of the loan amount. On April 1st this will increase to 1.25%. On a $100,000 loan amount the monthly premium will increase from $115 to $125. Add the upfront fee of $2.50 a month and this reflects an increase of $12.50 a month on a monthly payments on a $100,000 loan.
If you add this up over 30 years, the same insurance premium will cost your buyer in Florida an additional $4,500 compared to if they would have acquired it before April 01, 2012.
And then we have the FHA high balance loans, in which the loan amount is between $625,500 and $729,740. On those mortgages, effective June 01, 2012, the insurance premium will increase another 0.25% to 1.50%.
For instance, on a $700,000 loan amount the current upfront insurance premium is $670. Effective April 1st, the premium will increase from $670 to $729, an increase of $59.
The monthly premium increase takes effect on June 1st and will be $875, an increase of $205 from what your buyer would be paying today.
If you have buyers still on the fence and they are thinking about FHA financing and purchasing a home, I highly recommend that you let them know about these premium increases and the cost of financing. Your buyer should take advantage of the current loan terms available today.