Starting October 4th big changes are coming to the up front and monthly mortgage insurance for FHA loans. This will affect your monthly payment with FHA loans and also the highest FHA loan amount you can qualify for. Here’s how it works:
| Loan Type | Current Monthly MI | NEW monthly MI | Current Up Front MI | NEW Up Front MI |
| 30 yr fixed <5% down | .55% | .90% | 2.25% | 1% |
| 30 yr fixed >5% down | .50% | .85% | 2.25% | 1% |
| 15 yr fixed <10% down | .25% | .25% | 2.25% | 1% |
| 15 yr fixed >10% down | NONE | NONE | 2.25% | 1% |
As you review the chart you will see for all cases the up front FHA mortgage insurance is going down from 2.25% to 1%, but in most the monthly FHA mortgage insurance is going up from .55% to .9%. The net effect of this is a smaller loan principle balance, but a slightly higher payment per month due to the higher monthly FHA mortgage insurance. Let’s take a before and after example if you bought a house for $350,000 with a 3.5% down FHA loan.
- Base loan amount would be $350,000 X 96.5% = $337,750
- Add in the 1% up front mortgage insurance to the loan amount $337,750+$3,377=$341,127 loan amount with up from FHA MI added (under the old MI plan prior to October 4th 2010 loan amount would have been $345,349)
- FHA monthly mortgage insurance $341,127 X .90% = $3,070. $3,070 is your monthly mortgage insurance per year, divide that by 12 and you get $255 per month. (under the old MI plan prior to October 4th 2010 your monthly MI would have been $156/m0).
So you can see that the nice thing is your loan balance will be less under the new FHA mortgage insurance plan, but your monthly FHA MI payment will be higher under the new plan.
So I hope this helps in your planning to get FHA loan in California to buy a home.
Below are the most up-to-date highlights of FHA loan in California:
- Streamline FHA loans are available to those with current FHA loans to refinance to today’s ridiculously low 30 year fixed interest rates and drop your payment substantially
- FHA max loan amount in California is $729,750. This allows you to buy up to a $756,000 home with the min 3.5% down even in coastal areas such as Los Angeles, San Jose, San Francisco, Orange County and San Diego
- FHA loan interest rates are at historical lows
- FHA loan down payment is only 3.5% and this can be a gift from a relative
- FHA home loan requirements allow up to a 56.9% debt-to-income ratio where conventional stops at 45% with <20% down. This allows you to qualify for a higher priced home.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and Homepath, FHA, VA specialist)
858-922-7899
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