August 12th, 2013 2:15 PM by BILL WILBANKS
Are the changes that have taken effect over at FHA the last straw? They very well could be for many buyers today.
I am now highly recommending a conventional loan to most folks I discuss new financing with today since FHA bumped up both their annual premiums and the up front mortgage insurance premiums in the last three years. On top of that as of June 3, this year any borrower that wants a home loan with greater than 90% financing will now be forced to continue paying the annual premium in their monthly payment until the end of the loan term or when they pay it off before then. In the past like PMI on a conventional loan, it automatically went away or was dropped as soon as the loan got paid down to 78% of the orignal value or after 5 years on FHA whichever was later. Most buyers taking an FHA mortgage wanted to do so in many cases to be able to come in with the minimum 3.5% down payment on an FHA transaction. And other than the fact that FHA can assist a buyer with lower credit scores or very limited credit to qualify the rest of the math is losing traction very quickly.
If you want to see just how much of a difference and advantage in cost a conventional loan can be if you can put just another 1.5% down at 95% LTV click the "PMI vs FHA MI" button in the column to your left. You'll see a typical FHA 30 year fixed rate will be slightly lower on rate, but after the total loan size and PMI vs MI are factored in the loop you can see for yourself where I'm coming from today. Let me know what you think.