The Federal Housing Administration has decided to increase the premiums they charge for insuring mortgage home loans.  Since the sub-prime fallout the FHA has been taken on more and more home loans.  To cover their increased risk the FHA is increasing the premium charged upfront on loans from 1.5% to 1.75% of the loan amount.

Briefly, from July 14th to October 1st when the new loan premium amount goes into effect, the FHA determined the amount charged for premiums using a “risk-based” system.  The “risk based” pricing system determined the premium amount based on borrowers credit scores and the amount either paid down on the house at closing or, in the case of refinance, the amount of equity in the home.  In July Congress approved a bill that allowed the FHA to use the short-lived “risk based” system.

But what does this mean for the average borrower?  It means on a loan of $300,000 the required upfront premium on the loan will be $5,250 instead of the $4,500 it would have been a few short months ago.  It is important to note that the annual premium paid by borrowers in not changing and would remain at about 0.50% on a loan like the one in the sample above.

Investors have been shying away from buying mortgage securities not backed by a federal agency or government sponsored investors Freddie Mac and Fannie Mae.  This has seen the FHA taking on a larger share of the housing market, potentially as much as 30% by the end of this year.  Since Freddie and Fannie are becoming more cautious about guaranteeing mortgages due to depleted capital from heavy losses, the FHA is forced to increase their premium rates.

The FHA is still the best option around as far as getting a loan or refinancing a mortgage.  Borrowers can receive lower interest rates and can make down payments as small as 3% of the loan amount.  Also, the relaxed credit requirements make it a viable option for with poor credit or low-to-moderate income.

If you are wondering how the new American Housing Rescue and Foreclosure Prevention Act can help you then you should know the requirements to use the new refinancing programs that are available.

Here is a list of the new requirements for people who want to use the FHA to refinance their home loan:

•    The mortgage must be within the FHA loan limits.  The new limit is $625,500.
•    The FHA must hold the primary mortgage lien on the property.  People who have more than one lien on their property will need to consolidate those loans and pay them off with their FHA loan at the time they refinance.
•    The FHA loan is based on the current appraised value of the home.  The FHA is willing to finance up to 90% of the current appraised value, and if you owe more than this amount you may be able to get a financial break.  The FHA is willing to work with lenders who would like the FHA guaranteed loan and take a monetary loss on the current mortgage in order to refinance with the FHA.  Talk to your lender to see if they are willing to use this new program.
•    You must meet normal income loan requirements.  The FHA may look past credit problems due to unfavorable past loan conditions, but you will still need to meet income to debt ratio guidelines set forth by the FHA.

All of these guidelines of the program are required by the FHA in order to use the new program and get relief on your high mortgage payments or to get out of default and avoid foreclosure.  For more information go to http://fha.mortgageloanplace.com

The FHA Section 245 loan program is available to first-time or repeat homebuyers.  Applicants must meet all FHA eligibility requirements.  With the umbrella of the FHA insured Section 245 mortgage, lenders can grant loans to individuals or families who may not otherwise qualify for conventional loans or other FHA insured loans.

Also, with a FHA insured loan, down payments can be as low as 3 percent, allowing borrowers to finance the remaining 97 percent of the cost of the home through their mortgage.  FHA approved down payment grants are available as well.  Additionally, some or all of the closing costs may be financed into the mortgage, further reducing the up-front costs.

The graduated loan program is open to any family or individual who expects their annual income to rise substantially over the next five to ten years.  However, borrowers must occupy the purchased home as their primary residence.  The Section 245 program is not available to investors.  Applications for the Section 245 graduated loan program must be made through FHA approved lending institutions.

The types of properties that are included under the Section 245 graduated mortgage plan include single-family homes, multi-family homes, manufactured homes, and some health related facilities. 

Many individuals and families do not qualify for typical conventional fixed-rate mortgages, especially young and low to moderate-income families.  In order to reduce the risk to a lender, FHA has developed creative methods that allow a lender to confidently approve home loans to those lesser-qualified individuals.  The Section 245 graduated loan program is one of those methods that can allow a family with continually increasing incomes to live in their own home sooner than they thought possible.