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2015-01-09 10:12:29
Major Changes to FHA financing (great news)!

Attention all Home Buyers and Sellers!


You will want to take the time to read this right away.   If you are a buyer who needs a low down payment mortgage or a Seller who already has an FHA mortgage, this is going to affect you.   This week there have been two major changes announced regarding FHA financing, one of the most commonly used mortgages for home purchases.

FHA offers a low down payment mortgage (3.5% down), often with lower requirements for qualifying (lower credit scores than conventional financing). In Utah, there is an additional FHA product called Utah Housing that is a 0% down mortgage.

To summarize these new changes, monthly mortgage insurance on FHA financing (MIP) is being significantly reduced and monthly interest will now only be charged on the actual outstanding principle balance (not for the entire month regardless of principle owed).

Over the past several years, FHA financing has become less attractive compared to other loan programs available. These two changes will make FHA financing a much stronger option for a large percentage of buyers financing their purchase through a mortgage.

There are still pros/cons with each type of financing and it is best to sit down with an experienced and reputable mortgage specialist to discuss your options and to compare the loan programs for your individual situation. We STRONGLY recommend:

Lane Aldrich
First Colony Home Mortgage      
Mortgage Banker
Cell: 801-602-5746



Part 1

Annual MIP Changes:

01/08/2015:  As of 1pm EST, the status of the MIP changes is that annual MIP (paid monthly) is dropping from 135bps to 85bps.  At first, the FHA press release said 'for all new FHA-insured mortgages,' but now that phrase has been dropped completely.  So we don't exactly know if there will be some limitation as to who can take advantage of this, or if there will be some way for existing case numbers that haven't yet funded to benefit from the change.   No one can say until FHA puts out it’s official “Mortgagee Letter” and we are assuming the change is effective immediately but it may have a future start date.   Typically, changes are effective on a loan depending on when the FHA case number is pulled.  Therefore, many lenders have stopped pulling  FHA case numbers on loans until this issue is cleared up by HUD/FHA.


Part 2

Changes to Interest Calculation on FHA Insured Mortgages:

The revised policies in this final rule become effective for FHA-insured mortgages closed on or after January 21, 2015

Interest will only be allowed to be charged on the actual outstanding principle balance.   This means that two net positive effects will occur:

  1. A borrower will no longer be assessed interest for an entire month on an FHA loan once the 1st day of the month occurs.  This means that other programs such as bi-weekly payments, become useful to borrowers on the FHA program and borrowers are no longer paying interest on money for time periods they did not have it.
  2. Payoffs on FHA loans will calculated the same way that payoffs on Conventional and other loans are calculated.   Meaning, a seller will only have to pay the correct per-diem interest on his loan for as long as he has it and if the closing rolls over into the first few days of the month, he no longer needs to worry about paying an entire month’s of interest to FHA.

Again:  this revised policies in this final rule become effective for FHA-insured mortgages closed on or after January 21, 2015.

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