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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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FHA Rules to change around March 31st on Mortgage Insurance!

Someone else posted this article that talks about mortgage insurance tax breaks going back into effect for 2012 but as I was reading the article, I noticed something HUGE that is changing on FHA loans sometime after March 31st.

Homeowners will no longer be able to cancel the mortgage insurance on their FHA loan after they make 60 payments and the balance is 78% of the original appraised value! Once this change goes into effect, homeowners will have to pay mortgage insurance for the life of the loan!!!! My mortgage insurance will be $346 per month so I am looking forward to when I will no longer have to pay it. The good news is that homeowners who use an FHA loan to buy a house BEFORE the new rules go into effect, won't be impacted so their mortgage insurance can still be cancelled after 5 years.

If you are in the process of getting an FHA loan, try to close before the new rules go into effect, which will be shortly after March 31st as under the new rules, you will have to pay mortgage insurance for the life of the loan. A link to the article is below.

http://money.msn.com/taxes/article.aspx?post=a9c7cefc-6079-4b82-afe2-29dae7c14e7d
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Mike_B03
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Registered: ‎11-30-2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

From the article, it sounds like no date has been set and an annoucment is set to be made on or before March 31st. There is no way they would implement it that quickly, probably will annouce it then and say it goes into effect the following January or something like that.

 

Also, people can always refinance into a conventional loan down the road, they don't have to stay with an FHA loan for the life of the loan.

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MovingForward_2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.
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ficogirl1
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Registered: ‎01-23-2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

I disagree.  The article states:

 

"No date has been set for the change, HUD spokesman Lemar Wooley said by email. He expects an announcement by March 31 or sooner."

 

That means that the announcement regarding when the change will occur will be made by March 31 or sooner, but there is no date set for when the change will be implemented. 

 

 


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Valued Contributor
Mike_B03
Posts: 1,141
Registered: ‎11-30-2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!


MovingForward_2012 wrote:
Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.

What happens to people who are in the process but can't close yet since it's a new build? I hope we can be grandfathered in if there is a change because it would be BS otherwise.

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MovingForward_2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!


Mike_B03 wrote:

MovingForward_2012 wrote:
Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.

What happens to people who are in the process but can't close yet since it's a new build? I hope we can be grandfathered in if there is a change because it would be BS otherwise.


I think you will be grandfathered in as you sign the mortgage insurance disclosure form quite awhile before actual closing and I think that form will protect you.

 

You're right, no one knows when it will be implemented but I am assuming it will probably within a year from now.  Don't know if it will be sooner or later.  But I just wanted to give folks that are considering putting off buying a home for 1-2 years a heads up that if they will be doing an FHA loan, they might want to reconsider their timeframe given these changes.  The bigger the house, the more mortgage insurance costs.  And $346 per month for me is not trivial so I look forward to the savings in five years.  If it is $50 a month for a smaller home, the change is not so big of an impact.

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Mike_B03
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

Any chance of refinacing into a conventional loan fairly soon after you get your house? Over 5 years, you'll end up paying $20,760 in PMI. It will depend a lot on what interest rates are later on, and how much closing costs are...but if house values go up and you have some additional money to put down, it would probably be good to go in that direction.

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

It's possible but not a guarantee of course. I remember trying to refinance out of a two year ARM on our first house 8 years ago, and it was like continuously finding a mirage of water in the desert. Totally understand those circumstances were different with a crumbling housing market. But I just don't consider refinance a part of my plan as I am going about the home purchase this go round.

Now I completely forgot that next year I will get $3600 back from the IRS at a minimum and that amounts to $300 per month off the mortgage so $346 in PMI will really be $46 in PMI after a year. So you could estimate the same for your interest and who knows, it might completely offset the PMI.

I am still looking forward to when the PMI is cancelled because I will get $646 off my mortgage each month vs $300 and that is when I will consider our family stabilized in our dream home and can start taking vacations.
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Valued Contributor
Mike_B03
Posts: 1,141
Registered: ‎11-30-2012
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

How are you getting the $3600 back from the IRS? Is it related to the PMI?

Valued Contributor
JM-AM
Posts: 3,303
Registered: ‎06-09-2010
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Re: FHA Rules to change around March 31st on Mortgage Insurance!

Assuming she is referring to tax benefits...

 

But I would discuss any tax related issues with a professional CPA who is qualified.

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