Monday, September 3, 2012
Is USDA Going the way of FHA?
USDA announces changes a 33% increase to their monthly Mortgage Insurance Premium
With the recent change in the monthly Mortgage Insurance Premium, USDA is creeping up closer to the FHA threshold. Don't get me wrong USDA is still the way to go, but it just seems odd that the government first imposed a monthly amount, and now for the second year in a row has increased it. The latest changes doesn't effect the up front Funding Fee, which remains at 2% of the sale price. This fee can still be financed into the loan. FHA has a 1.75% fee. The annual premium has increased from .3% to .4% of the loan amount. Broken down into monthly installments it doesn't seem to imposing compared to FHA's 1.25%, but it still is creeping up. All in all, USDA remains the better option of the two given their 100% financing as opposed to the 3.5% required down payment by FHA. Hopefully, this is the last increase for both types of loans for a while.
Andy Williams
President
Abacus Regional Mortgage
NMLS # 118317
484 695 5972
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The FHA does not have any restrictions on how high of a rate a lender can offer with its fixed-rate loans. However, it behooves the lender to come close to standard rates, especially since borrowers with good to excellent credit can easily seek financing elsewhere. People with less than stellar credit are most likely to qualify for 30-year fixed rate loans through the FHA than any other type. All borrowers must pay Private Mortgage Insurance (PMI) on loans with less than a 20% down payment. However, the borrower is allowed to finance those payments with the loan.
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