September 10th, 2010 4:43 PM

It is official. The bill HR 5981 has been passed and made into law. But what exactly does that mean to people in the process of LOOKING for a home? My hope is that these points will clarify any and all of your questions:

1. First the great news. If you are currently looking at an FHA loan with a value of $250,000, your closing costs will go down due to a decrease in the Upfront Mortgage Insurance Premium from 2.25% to 1%.  So on $250,000 loan  under the current plan that premium would add $5,625 to your closing costs. Under the upcoming plan your premium would be $2,500, a $3,125 difference in closing costs. Great news!!
2. Now the not so good news. If you borrow more that 95% of the value of the home to 96.5% your monthly payment is going up. Just taking into account your monthly payment without including taxes and home owners insurance, since each area is different, you payment on a $250,000 loan at 4.5% will go from $1,267(Principal + Interest)+ 114.58 (Private mortgage insurance)= $1,381.58.  After October 4th, with that same loan amount and interest rate you payment will go to $1,267 + 187.50 (Private mortgage insurance)= $1,454.5. Although the difference does not see that high it will affect the purchasing power of some buyers especially as you seek a higher loan amount.
3. If you borrow less than 95% of the value of the home the numbers go from $1,381.58 to $1,433.67 after October 4th

This is just a summary of the new guidelines. For a more detailed look, please visit the HUD website at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-28ml.pdf

As always, consult with your mortgage professional for a detailed mortgage payment analysis that includes taxes,  homeowners insurance and an accurate mortgage insurance premium for your specific loan amount.

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