FHA changes effective October 4, 2010 in San Mateo County

FHA loans are becoming more important in San Mateo County. The maximum loan amount is $729,750. There are many homes that can be marketed with FHA financing being available, or purchased utilizing FHA financing.

There are some changes being implemented for FHA loans beginning in October. This article is an excellent summary of the changes and what the impact will be on transactions utilizing FHA financing in San Mateo County.

Effective for FHA loans for which the case number is assigned on or after October 4, 2010 the Upfront Mortgage Insurance will decrease from 2.25 to 1.00 (100 basis points) on all FHA insured loans except Home Equity Conversion (HECM - "reverse mortgage"). Chances are you have heard this or some version of it but until yesterday, September 1, 2010, it was not in writing in the official form from HUD.

When are FHA case numbers assigned?

Case numbers must be assigned prior to ordering third party services such as the appraisal. Appraisals are not ordered until there is a fully executed sales agreement in the lender's possession. The lender orders the FHA case number and assigns it to the loan application where it becomes permanent record. 

Monthly Mortgage Insurance also changing.

With UFMIP going down MMIP is heading up. Much more dangerous to the industry because it impacts monthly payment and thus debt-to-income ration (DTI). Currently on loans of over 95% the MIP is .55% annually and from 95% and lower it is .50% annually. Effective October 4, 2010 those numbers will be .85% and .90% which results in an increased monthly payment.

Contrary to some reports there has been no notification of change in the amount of closing contributions by the seller which can be contributed to cover closing costs which is 6% and has not (yet) changed. The buyer must contribute 3.5% of their own money but it can be a gift.

This information applies to 203b and 203k loans.

Examples - top row is now, second row is after 10/4 and the $43.39 is the monthly payment increase:

Sales Price Down Loan Amt UFMIP Total Loan P&I Pmt MIP P&I&MIP
200,000 7,000 193,000 4,342.50 197,342.50 1,054.98 88.46 1,143.44
200,000 7,000 193,000 1,930.00 194,930.00 1,042.08 144.75 1,186.83
              43.39 

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Ken Cook - Community Outreach Leader Southeast Region (I make friends, that's my job :) - FHA, USDA, VA and Conventional Home Loans (678) 439-8683 NMLS ID 208452

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Phil Caulfield
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FHA changes effective October 4, 2010 in San Mateo County
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