FHA says they should have done less business in the past and (to pay for their sins) they should do less business in the future. To help that process along, they drastically increased the Up Front Mortgage Insurance Premium (UFMIP), doubled the cost of the Monthly Insurance Premium (MIP), and will require the MIP to be paid for the life of the loan.
Guess what? Their wish is coming true! The Government Agency created in 1934 to “assist in providing housing opportunities” for American families saw their application volume drop by 50% in June. At a time when mortgage rates were near all time lows, FHA priced them self out of the market. Great help they are!
Many features of a FHA Mortgage make it an attractive mortgage option for First Home Buyers. However, the cost of the mortgage insurance makes the monthly obligation too expensive. I’m working on two transactions now. Each has challenges that could have been addressed with a FHA loan in the past. One will be done as a conventional mortgage with a higher rate but lower MI for a savings of $60/month; the other, luckily, as a USDA Loan with a similar rate and MI that is 1/3 the cost of FHA premiums.
I don’t think I’ll recommend a FHA Insured Mortgage to my clients unless that’s the only way to get them in a new home.
Here are excepts from a National Association of REALTOR® statement on President Obama’s recent housing policy speech.
“NAR believes the principles of comprehensive housing finance reform outlined by President Obama will contribute to the long-term stability of our nation’s housing market and provide consumers with access to affordable mortgage credit, even during economic downturns.
“Realtors® remain steadfast in our efforts to preserve the government guarantee in any restructured secondary mortgage market to ensure the continued availability of safe, reliable mortgages.”
“Realtors® urge continued support for the Federal Housing Administration’s mortgage insurance programs. Many First Home Buyers rely on FHA-insured loans to purchase a home. It is important that we preserve access to FHA for all qualified middle class families.
“NAR is ready and willing to work with President Obama and Congress to develop policies that ensure mortgage credit is always available at reasonable costs so that everyone who is willing and able to afford a home can do so.”