This week, the Department of Housing and Urban Development (HUD) made a surprise announcement that is beneficial to homebuyers seeking FHA Loans.
Mortgage Insurance Premiums (MIP) will be lowered 25bps for FHA loans effective on 1/27/17. In addition, The maximum allowable debt-to-income ratio is increasing from 41% to 45% and the minimum allowable credit score for VHDA’s FHA Grant loan is decreasing from 640 to 620.
A little background for those who are unsure what FHA loans and Mortgage Insurance Premiums are.. The FHA (Fair Housing Administration) is a government entity that insures loans to allow buyers with lower credit scores, down payment amounts, income, etc. to have the ability to purchase a home. Home buyers using FHA loans have to pay insurance premiums which accumulate in a pool of reserves to satisfy any defaulting mortgages in the program. This insurance, also known as Mortgage Insurance Premiums (MIPs), is paid in two phases-- 1) upfront at closing, and 2) annually in 12 monthly payments. The policy change discussed above lowers the monthly mortgage insurance, and does not change the upfront MIP of 1.75%.
So in a nutshell, as a result of these changes, as buyers, you could potentially qualify for a higher loan and look at homes in higher price brackets.
If you have any questions and/or would like to begin a home search with my assistance, please don't hesitate to reach out!