FHA Risk-Based Mortgage Insurance
This bears repeating as it goes into effect next week. I’m still hearing many lenders quote FHA as the mortgage option with no penality for FICO score. This is no longer correct.
Effective with new FHA case number assignments on or after July 14, 2008, FHA will implement risk-based premiums on one- to four-unit single family mortgages. Highlights of change include:
- Upfront MI will range from 1.25 percent of the loan amount for lower-risk borrowers to 2.25 percent for riskier borrowers.
- No borrower who qualifies for a FHA-insured mortgage will pay more than 2.25 percent on the upfront mortgage insurance premium and 55 basis points for the annual premium.
- Borrowers with credit bureau scores must be risk-classified by FHA’s TOTAL Mortgage Scorecard.
- Those in risk categories without a premium shown are not eligible for FHA-insured mortgage financing.
- Borrowers without credit bureau scores will need to be manually underwritten and deemed as eligible based on criteria described in Mortgagee Letter 2008-11; the mortgage insurance premium will be determined by the loan-to-value ratio for the non-traditional column in the premium schedule.
First-time homebuyers who will be obtaining a mortgage with an LTV greater than 95 percent and whose decision credit score is in the 559-500 range are entitled to a reduction of their upfront mortgage insurance premium from 2.25 percent to 2.00 percent provided the homebuyer completes HUD-approved pre-purchase counseling.
Pre-purchase counseling must be obtained from a HUD-approved housing counseling agency, a participating agency of a HUD-approved housing counseling intermediary or a state Housing Finance Agency receiving HUD housing counseling grant funds, and the counseling must occur prior to execution of the sales agreement. With this requirement, it is FHA’s intent to encourage borrowers to participate in meaningful counseling prior to the decision to purchase a home, not to create an incentive or burden for lenders to have borrowers re-execute the sales contract in order to receive a reduced premium. Borrowers can take the course within one year of purchase.
March 30th, 2010 at 5:07 am
Good suff, can i subscribe to your site or should I just bookmark and come back every so often?