FHA Loans and Mortgage Insurance

The more things change, the more they change. As of June 2013, FHA’s decision to make mortgage insurance an enduring expense will go into effect.

What was traditionally a fee that had an end in sight (when FHA mortgagors would reach the 78% loan to value ratio they would no longer need to fork over that little sidecar called Primary Mortgage Insurance or PMI); will now be paying this monthly mortgage insurance premium for the life of the loan.

I guess this was sort of inevitable. FHA is an entity that gave little credence to credit scores and has traditionally been more forgiving when it came to loan approval guidelines. Then you add in a little mismanagement, some subprime sludge and a dash of politics and you’ve got a pot of gold that just ran dry.

Conventional Loans as an Alternative

On the lighter side, we are continuing to see the trend of conventional loans not looking so bad. With 5% or even 3% down and a decent credit score you can ultimately do a lot better if you can stay away from FHA.

At the end of the day, FHA may just not be going your way. So if you qualify, circling back to conventional loans can offer you a more palatable deal in the long term. There are again multiple factors that go into these loan approvals, but never just assume one is not the right fit for your credit history and circumstance.

Sometimes the investment of a little time really pays off when you are talking about money. Please feel free to give me a call if anyone has questions about the upcoming mortgage insurance mandate or conventional loan qualifications.

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