Kirkland WA Homes For Sale

FHA Guideline Changes Go Into Effect Oct 4th, 2010

These guideline changes will decrease the up front mortgage insurance premium from 2.25% of the loan amount down to 1.00%.  The yearly mortgage insurance premium will be increased from 0.55% to 0.85% - 0.90% of the loan amount.

At first glance it doesn't sound all that bad but these changes negatively impact home owners weather you are refinancing you mortgage or buying a new home.

If you have an existing FHA loan and you are looking to refinance your mortgage after October 4th, 2010, you will most likely not be able to refinance.  FHA requires a 5% payment reduction when you refinance your mortgage.  With the increase in the monthly mortgage insurance premium it will be difficult for you to qualify for that 5% payment reduction even if you can lower your interest rate by more than 1.00%.

If you are looking to purchase a new home this also impacts home owners in a negative way.  The upfront mortgage insurance premium is less, but the monthly mortgage insurance is 38% more than prior to the changes.  Comparing the exact same mortgage against each other a mortgage taken out after October 4th, 2010 has a higher monthly mortgage payment.  This means that you will qualify for less of a home than prior to October 4th, 2010, how is this going to affect home prices?

If you aren't going to do something to help improve the housing situation, you really shouldn't do anything at all.  Rip the band aide off and allow the housing market to just correct itself.