The FHA has raised its mortgage insurance premiums. As this Washington Post article indicates, it was out of necessity.
It's one more reason to consider a no-mortgage insurance loan from an approved MassHousing lender. Only state housing finance agencies like MassHousing can offer a loan these days with a downpayment requirement of as little as 3% and no mortgage insurance.
There are still plenty of reasons some buyers will use an FHA-insured loan, but the trend generally in conventional mortgage lending is toward higher costs.
It reminds me of a sign I once saw in a print shop that read "Speed, Quality, Price…pick two out of three." It meant (perhaps obviously) that you could have a job done quickly at low cost, but that you would likely sacrifice quality in the process. Or that you could get high-quality at a lower price but you would have to wait longer. You get the idea.
When it comes to home mortgage loans, the sign today might read "Easy Credit, Low Downpayment, Low Fees…pick two out of the three."
Even with its recent fee changes, the FHA may still be the easiest credit guarantee available for low- downpayment loans, but the cost is likely to rise dramatically.
If the meltdown in the mortgage market has taught us anything it's that you can't be all things to all people. Even with the federal government behind them the FHA can't offer the elusive combination of easy credit, low downpayment, and low costs.
MassHousing has long been a provider of safe, affordable mortgage products to homebuyers with modest incomes. We built our products around low downpayments, and reasonable costs. We chose not to go down the road of substandard credit offset by higher borrowing costs. We view that approach as being inappropriate for our borrowers and contrary to our ultimate goal of safe, sustainable homeownership.
As a result, our delinquencies and foreclosures are a fraction of those seen at other high loan-to-value (i.e., low downpayment) lenders and mortgage guarantors. We continue to offer safe, affordable mortgage products that require low downpayments and feature comparatively low interest rates and insurance costs.
Ask your local lender if they are MassHousing-approved and if they offer our new "No-MI" loan that requires just a 3% downpayment.