HUD issued a press release this week outlining the changes we knew were coming, but were hoping wouldn't be here until later this year! The changes won't be effective until the mortgagee letters are released, but expect those soon.
The one change that was given an effective date was the changes to the FHA reverse mortgage loans. Those changes will mean that the standard fixed rate product will be discontinued and replaced with a saver product. This product will have fixed or variable mortgage rates and lower fees, but also lower equity withdrawals. This is effective with FHA case numbers issued on April 1, 2013.
The changes coming are the ones that affect the monthly mortgage insurance. The annual mortgage insurance is going to be increased by 0.10 basis points, from 1.25% to 1.35% for those that put less than 5% down. If you put more than 5% down, the annual insurance will be 1.30%. This will affect everyone's payment.
The other big change coming is that the mortgage insurance will be for the life of the loan. The only way to eliminate it will be to pay off the mortgage or refinance to another type of financing.
For those in areas that allow FHA jumbos, the minimum down payment will be 5%. This doesn't affect us in Minnesota but will affect those in other areas.
If your credit score is below 620, FHA will want your debt to income ratio to be below 43%. This also doesn't affect a lot of us as many lenders here require a minimum score of 640.
If you are planning to buy a home with a FHA mortgage and you have written a purchase agreement, make sure your lender gets a FHA case number issued before these changes are effective.