The HUD is going to revise their requirements for the upfront mortgage insurance payments again as they move away from risk based pricing.
The recent changes by FHA to help offset risk due to credit scores are going to be modified according to a recent announcement by FHA. FHA earlier this year announced they were going to implement risk based mortgage insurance for borrowers based on the credit score of the applicant. This model was similar to the methods that Fannie Mae and Freddie Mac use to price out their mortgage loans, and rewards borrowers with higher credit scores, but increases fees for borrowers whose credit scores drop below 740 on a tiered pricing system.
FHA charges mortgage insurance in two areas on there loans, they charge a percentage up front, referred to as the upfront mortgage insurance premium and then they charge a monthly amount as well. There changes will adjust the upfront required mortgage insurance amount to 1.75% for all loan applicants, up from 1.5%, but will discontinue adjustments based on the borrowers credit score. This move should be viewed as welcome news for individuals with lower fico scores who often now are priced out of conventional financing due to the price adjustments.
FHA loans are now also becoming the loan of choice for individuals with good to excellent credit who are looking to refinance and cash out their homes equity or buy a home with minimal down. The loan to value guideline for FHA loans are often more flexible than conventional finance loans.
8-28-2008 ? LoanNetwork.com
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