Mr Williamsburg, Revolutionary ideas on real estate!Hampton Roads Virginia

If you are contemplating a home purchase in the near future and will be using an an FHA loan, you might want to pull the trigger quickly.

Not only is FHA going to be raising the cost of its required mortgage insurance (MIP), it’s also going to require that the insurance be kept for the life of the loan.

Today, once a home’s loan-to-value gets below 78%, mortgage insurance isn’t required; that takes 10 years or so. A homeowner will typically pay several hundred dollars a month for mortgage insurance — a cost that, soon, won’t go away. 

This change will force anyone who wants to get rid of the PMI to refinance. Who knows what interest rates will be at that time.

You can bypass this problem all together by closing your purchase before the first of next year or wait until you can purchase a home with a conventional loan where you will need to put at least 10% down but more likely 20% of the purchase price.

When will this happen?  FHA hasn’t specified when exactly it would implement the new rule, but experts  estimate it should be around April, 2013. So if you are thinking of getting a new FHA loan it may be a good idea to do so before the new changes take effect.

Also announced was an increase in the FHA mortgage insurance premium – by 10 basis points or 0.1 percent. So if you are taking out a loan of $400,000, the hike will increase your payment by $400 per year.

Final thoughts

Keep in mind that FHA mortgage loans are not the only game in town.  Conventional financing with private mortgage insurance might soon prove to be a very popular and cost effective option for home buyers.

Looking to buy a home in Williamsburg or Hampton Roads VA. I would be happy to connect you with one of our experienced mortgage experts who can discuss payments, down payments and any other questions you have.

click here to contact John by email, or call him at 757-254-8136.

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