Looming Government Mortgage Programs Changes
On October 1st, a new federal government fiscal year will begin and changes to all programs will go into effect. These changes will include changes to the major government mortgage loan programs. The changes affect FHA, VA and USDA mortgage programs and will will be effective October 1, 2011.
There's a favorable change for VA loans. The funding fee for these loans is being reduced from 2.15% to 1.5%. VA mortgages have the lowest default rate of any government guaranteed loans and this lower rate is factored into the decrease in the loan fees.
FHA loans will be making a major change that will affect buyers, sellers and mortgage lenders. The highest mortgage amount of FHA loans is being reduced notably. The maximum obtainable limit varies by location, but in a number of locations, the limit is going to fall by higher than 35%. The drop in the maximum loan amount is centered on reductions in home values and prices over the past few years. October 1st will see these new maximum rates go into effect.
Rural development loans, USDA home loans will be affected in three ways. 1st, the funding fee will fall from 3.5% to 2.0%. This is good news, but, there's another change that balances the reduction.
The second balancing change for USDA loans is that for the 1st time, mortgage insurance will be mandatory for USDA backed loans. This mortgage insurance premium (MIP) will be set at 0.3% yearly of the mortgage value.
Let's look at how these changes work against each other. For a $100,000 loan, you will initially $1,500 less in the loan funding fee, but will pay $300, or 0.3%, in mortgage insurance. This payment will come out monthly at roughly $25. The changes will be in your favor for the 1st 5 or so years, but then you'll continue paying the MIP for the period of the mortgage.
The third change to USDA mortgages is in the USDA eligibility maps. These maps show residences (houses and condos) in regions eligible for USDA loans. As a result of expansion in many regions, homes in suburban locations are presently eligible. That will change on October 1st. However, be certain to talk with a USDA mortgage specialist for the reason that a lot of areas that you might not consider eligible will even now be included in the maps. Not only that, selecting a home just a few miles away, may well permit you to take advantage of the USDA loan program.
Government mortgage loan programs provide guaranteed mortgages that require smaller or no down payment and less stringent credit standards. If you can qualify, these loans will allow you to buy a home with less money down and less money out of pocket for closing costs.
There's a favorable change for VA loans. The funding fee for these loans is being reduced from 2.15% to 1.5%. VA mortgages have the lowest default rate of any government guaranteed loans and this lower rate is factored into the decrease in the loan fees.
FHA loans will be making a major change that will affect buyers, sellers and mortgage lenders. The highest mortgage amount of FHA loans is being reduced notably. The maximum obtainable limit varies by location, but in a number of locations, the limit is going to fall by higher than 35%. The drop in the maximum loan amount is centered on reductions in home values and prices over the past few years. October 1st will see these new maximum rates go into effect.
Rural development loans, USDA home loans will be affected in three ways. 1st, the funding fee will fall from 3.5% to 2.0%. This is good news, but, there's another change that balances the reduction.
The second balancing change for USDA loans is that for the 1st time, mortgage insurance will be mandatory for USDA backed loans. This mortgage insurance premium (MIP) will be set at 0.3% yearly of the mortgage value.
Let's look at how these changes work against each other. For a $100,000 loan, you will initially $1,500 less in the loan funding fee, but will pay $300, or 0.3%, in mortgage insurance. This payment will come out monthly at roughly $25. The changes will be in your favor for the 1st 5 or so years, but then you'll continue paying the MIP for the period of the mortgage.
The third change to USDA mortgages is in the USDA eligibility maps. These maps show residences (houses and condos) in regions eligible for USDA loans. As a result of expansion in many regions, homes in suburban locations are presently eligible. That will change on October 1st. However, be certain to talk with a USDA mortgage specialist for the reason that a lot of areas that you might not consider eligible will even now be included in the maps. Not only that, selecting a home just a few miles away, may well permit you to take advantage of the USDA loan program.
Government mortgage loan programs provide guaranteed mortgages that require smaller or no down payment and less stringent credit standards. If you can qualify, these loans will allow you to buy a home with less money down and less money out of pocket for closing costs.
About the Author:
To learn more about USDA home loans and USDA Mortgages go to Steve Jeppensen's USDA Loan Website.