As announced earlier this year, the FHA (Federal Housing Administration) decreased the Yearly Mortgage Insurance Premium on Monday January 26th. There are two components to FHA Mortgage Insurance…the “Up-Front” Premium and the on-going “Yearly Premium”. The Up-Font Premium is 1.75% and this Premium is almost always added to the Loan Balance and therefore “Financed”. At this point, the FHA, the “Up-Front Premium” remains unchanged. However, the yearly Premium was reduced from 1.35% to 0.85%. This reduction is significant in two ways. First of all, it means lower Monthly Payments as this Premium is added to the regular “Principle and Interest” Payments on a a monthly basis. So if a Borrower’s Base Interest Rate was 4.00% (for example), adding the 1.35% Mortgage Insurance Premium had the effect of increasing the overall Rate to 5.35%. Based on the new reduced Premium the “overall Rate” would now be 4.85% (using the same 4.00% Base Rate). In addition to lowering the Monthly Payment amount, this decrease could also help a Borrower to better qualify for a Loan because the Lower Payment might offset possible “Debt to Income” challenges a Borrower might be facing if they were borrowing at the maximum of what they qualified for. New Horizon Mortgage Concepts has already had Clients benefit from this reduction in Mortgage Insurance and we look forward to continuing to explore ways in which this new Lending Guideline change might prove advantageous to our Clients.

The FHA has just announced that it will be lowering the yearly Mortgage Insurance Premium later this month. Currently the Yearly Premium is 1.35%, but the new Premium will be 1/2 of a percent (0.5%) lower at 0.85%. In the wake of the 2008 “Financial / Housing Meltdown” in the U.S., the Federal Housing Administration (FHA) played an important role for Homeowners. FHA Insured Financing allowed Borrowers to buy a Home with Down Payments as low as 3.5% and in addition was more forgiving regarding Credit Scores and other qualifying criteria. Because the FHA was Insuring the Loan, it was also the case that the Interest Rates available for FHA Loans were lower than what was available through Conventional Financing. In exchange for all of these benefits, the Borrower paid “Mortgage Insurance” in the form of both an “upfront” and ongoing “yearly” Premium.

One of the most common questions I’m asked is: “Am I going to have to pay a higher Interest Rate because it’s a Mobile Home?”. The short answer is…not really. New Horizon Mortgage Concepts has aligned itself with Lenders that aren’t afraid of Manufactured Homes…and that gets reflected in the Interest Rates. In general, much of what Banks do is based upon perceived risk. If a Lender feels that a certain type of Borrower, or Housing Type, is  “riskier”…they’ll do a variety of things to “offset” that risk. Raising the Interest Rate is one the “tools” utilized to compensate for (perceived) risk. However, not all Lenders “perceive” Manufactured Homes as being a higher risk…and so the Interest Rates they offer are competitive with the Rates offered on other types of Properties. Keep in mind that Interest Rates are also determined  by Credit Scores, the type of Loan Program (for example Government vs. Conventional), and even what State a Property is located in. In many instances, we’ll have “well qualified” Borrowers paying a lower Interest Rate on a Manufactured Home than a lessor a qualified Borrower might pay on a “stick built” home. So, there’s more to Interest Rates than meets the eye…and our Clients are frequently surprised and ultimately pleased with the Interest Rate we secure for them on their Manufactured / Mobile Home Loans.

Based on the most recent meeting of the FED, and per comments by Janet Yellen, although the Government is going to be cutting back on their buying of Bonds (i.e. Economic Stimulus), Long Term Interest Rates are expected to remain low into 2015.

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NMLS ID: 329381