FHA today announced reduction in upfront Mortgage Insurance Premium (UFMIP) for San Jose First Time Home Buyers and FHA Streamline Refinance on San Jose homes.

A change that has been prompted by passage of H.R. 5981 in the congress, will reduce the upfront mortgage insurance premium to 1% from the current 2.25%. At the same time, the annual mortgage insurance premium currently at .55% for the minimum downpayment of 3.5% will go up to .90%. For downpayments at 5% or more the annual mortgage insurance may go up to .85% from the current .50% on a 30 year fixed loan. These are my personal estimates based on the announcement. More precise details from FHA are still awaited.

Lets take an example at $400,000 loan amount to see how it impacts you.

As you can see in the table above, the new policy change increases the monthly payment on an FHA loan and hence also requires higher income to qualify for the same loan amount. While the reduction of upfront mortgage insurance premium is a welcome move, most of the First Time Home Buyers were not severely impacted by this so far because it gets added to the loan amount. And hence they weren’t required to add that to their “cash to close”.

In a nutshell, depending on how you look at it it’s both a good and a bad news for San Jose First Time Home Buyers and homeowners seeking to get an FHA Streamline Refinance.

We are a San Jose based FHA approved lender and will be glad to advise you if FHA loans are a good option for financing your home. To schedule a free consultation, please email me at Shashank@ArcusLending.com or call my office at 408.615.0655.

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