HUD CHANGES TO MORTGAGE INSURANCE (MIP)

If you have been considering buying a home in the near future, here is food for thought. In April of this year mortgage insurance premiums are going up. What is mortgage insurance and what does that mean for you as a buyer?

Mortgage insurance (MIP) is the premium lenders charge borrowers to protect themselves against losses that result when a borrower defaults on their loan. Mortgage insurance can add a minimum of $150.78 to the monthly mortgage payment. In order to avoid paying mortgage insurance, the borrower had to make at least a 20% down payment on the home purchase. Typically most people, especially first time homebuyers, apply for FHA loans because of the low down payment requirement of 3.5%. After the value of the home dropped below 80%, the borrower could request that mortgage insurance be discontinued.
All that is going to change! With the increase in mortgage insurance, borrows can expect the premium to from $150.78 per month to $162.84. If you put less than a 10% down payment, mortgage insurance must be paid for the LIFE of the loan! Not a lot you say. Well it will have an impact on how much house you can buy. It may mean a $5000 drop in price of your home purchase. So if you are approved for $150,000, you now may only qualify for $145,000. What can $5000 mean:

1 full bath $3500
Deck $3500
Fire place $1500
Garage $4500

These are just rough estimates, but you get the idea. If you have not already been pre-approved for a loan, do so. April 1 is the drop dead date. Let me and my team help you make your dream of owning a home a reality. Call us at 804-592-1489. We also have a list of lenders who work with first time homebuyers and have available grant funds to assist with down payment and closing costs.