The fed recently announced big changes in the way that AMI is handled. The new rules mean that most future borrowers will be required to keep Annual Mortgage Insurance for a longer period of time, possibly even for the duration of the loan! This change that will have home owners hurting as it adds thousands of dollars to the cost of the home loan each year. If you want to have your loan fall under the current rules, where you can end the insurance after just 5 years if you own 20% of the value of your home, you need to act quick. Only home loans completed after June 3rd will apply to the new rules.
Because of the time necessary to get a mortgage completed, mortgage professionals are advising that you apply before May 24th. The sooner the better says New Jersey Mortgage Broker Will Johnson. He expects that the closer to the deadline the more in a rush people in his industry will be trying to get these loans done before the rule changes takes over. To avoid running out of time and sacked with several thousands in extra charges he asks you get on this as quickly as you possibly can.
With the new rules the fed has set, new loans after the 3rd of June would have much higher pmi than home loans issued before this date. With the new changes the private mortgage insurance would for some home owners, be for the length of the home loan. Under today’s rules, the PMI is removed after 5 years if the borrower owns over 20% of the home. With the new rules home owners who borrow over 90% of the value of the home will now pay the private mortgage insurance for the duration of the mortgage. For home owners that have more money to use as a down payment and borrow below 90% of the value of the home will have private mortgage insurance cancel after 10 years as long as they own 22% of the house.
In the last week the FHA announced that it would be changing the rate of the annual mortgage insurance. This rate change takes hold on April 1st. Borrowers getting loans approved after this date can expect a .1% increase. This comes out to $100 for every $100,000 of the loan, each year. Borrowers with a $400,000 mortgage will pay $400 more each year than a borrower that had received the identical loan today. The rate hike is slightly lower for borrowers getting loans over $625,000. The rate for these borrowers will only be increased by 0.05%. $50 for each $100,000 borrowed. There are other things to consider that may effect the new rate you will pay, but these will be the main 2 that will effect most of the of borrowers.
Clearly this is something you will want to prevent from happening to you. Many mortgage experts advise that you take action prior to the 25th of March to prevent any issue that many keep your loan from being approved in time. If your loan is not absolutely approved by April 1st it will be subject to the new policy with the increased charges.
The change in the policy took effect because of the devastating consequence the bursting housing bubble has had on the federal program that honored all of the loans that were being foreclosed on. The government is trying to refill its money so that it can keep to secure for future home owners. This new rule will end up costing new home owners more, but should secure the government backing of mortgages for many decades to come. Without this program it is quite likely that far fewer people would qualify for home loans. Now is the time to act if you are shopping for a home. If you wait too long new rates start that will cost you several thousands of dollars. Seek a mortgage expert today who can help you get the home you have always wanted.