David Stephens, Assistant Secretary of HUD and the resident town crier of FHA, announced today that the FHA insurance pool is quickly becoming depleted.
Effective September 7th, the FHA upfront premium will be decreased from the current 2.25 to 1.00% of the loan amount. The monthly premium will be raised from .55 to between .85 to .90 percent.
He made the announcement to prepare lenders before the mortgagee letter is released. So before you think the mortgage sky is falling, the difference in payment on a $200,000 loan amount will be increased about $37.00 a month. The higher loan amounts, over $300,000, will be approximately $60.00 more per month.
This may not be enough of a detriment for borrowers to consider Fannie Mae or Freddie Mac (conventional) loans as an alternative, unless they have good credit and money to put down. And with Fannie and Freddie continuing to tighten underwriting guidelines, FHA may still be the best option for families with limited down payment.
Mr. Stephens did not mention altering the minimum down payment requirements or sales contributions. But with our mortgage landscape evolving daily, changes can occur on very short notice. Stay tuned.
