Finance Friday: FHA Changes proposed this week

FHA announced their proposed changes this week to help customers of adjustable rate loans refinance into FHA loans.  Effective January 1, 2008, the FHA Up Front Mortgage Insurance Premium (UFMIP) will no longer be a flat 1.5% of the loan amount, but will vary based on risk.  The three risk factors include down payment, source of funds, and credit score.  The lowest  up front premium will be .75% of the loan amount for borrowers with a credit score above 680 and a down payment of at least 10%.  Borrowers with the standard 3% down will have premiums ranging from 1.25% (with a 680 credit score) to 2.25% with a 560 credit score.  Borrowers without a credit score must put at least 5% down and the premium will be 2.25%.  If the down payment comes from other than their own funds (or bona fide gifts from relatives), the up front premium is increased by .50%.   

Borrowers with other forms of down payment, including down payment assistance programs, will pay an up front premium of 1.75% with a 680 credit score, a 2.00% premium with a 640 credit score, and a 2.25% premium with a 600 credit score.  Borrowers with a credit score below 600 or with no credit score are not eligible for down payment assistance programs.  Borrowers with late payments caused by an interest rate increases or payment adjustments will be eligible for refinancing providing they meet all other underwriting standards.

Rates have remained stable this week, no point low fee thirty year mortgages are still available at 6.25%.

Guest Author Randy Kelly is a Mortgage Banker and Finance Author with Boulder West Financial Services. He can be reached on-line at http://www.boulderwest.com/.