So, the news is that FHA is increasing the annual Mortgage Insurance Premium cost again by .25% on April 18, 2011. That means that your monthly house payments will increase for you even if the interest rates remain the same.
If you are contemplating buying a house soon and are ready to take action you can still lock in the lower Mortgage Insurance Premium (MIP) if you act before 4/18/2011. You will need to a completed sale contract which has to be signed by all parties AND your lender would need to submit the offer for financing so there would be an FHA case number before 4/18/11 in order to get the lower MIP rate for your loan.
So what are the practical impications of this rate increase? Well. if you purchased a $175,000 home at 5% interest, the new Mortgage Interest Payment will mean that you will end up paying an extra $35 more each month to live in that same home.
Remember that the other major factor that can impact your monthly payment is the interest rate. Right now the interest rates are still very low. If the interest rate goes up by .5% by the same effective date then you could pay $88 more per month to live in the same home. Obviously if the rate goes up more, you will see even greater increases. You can go the the Veenstra Team website and use our mortgage calculator to better understand what a change in interest rates will do to your monthly payment.
Check out the table below to see changes in monthly payments for a home purchase of $175,000.
|$1298.75 FHA Payment||Before 4/18/11||On or after 4/18/11||If rate goes up.5%|
|Mortgage @ 5.00 for 30 years||$168.875||$168.875||$168.875|
|Mortgage including Financed MIP||$170.564||$170.564||$170.564|
|Monthly Payment (P& I)||$915.62||$915.62||$968.44|
|Monthly Mortgage Insurance||$127.92||$163.46||$163.46|
|Monthly Tax and Insurance Escrow||$255.21||$255.21||$255.21|
|Total Monthly Payment||$1298.75||$1334.29||$1387.11|
|+52.82 more interest|
|$35.54 more MIP costs||+35.54 more MIP costs|
|TOTAL OF $88.36 MORE/MONTH|
The Veenstra Team can help you determine whether you can purchase a home sooner rather than later. We can connect you to a lender to pre-qualify you. If you are “stuck in a lease”, you should consider the cost of waiting to purchase VS. the cost of breaking the lease and paying the penalty. Each case must be considered based on the individual circumstances and we are here to help you discern the options so you can make the wisest decision for you! Just to put things into perspective for you, $88 dollars a month over a 15 year period is $15,840 and over the course of a 30 year loan is $31,680.
Your Kalamazoo Real Estate Experts and Neighbors,
The Veenstra Team – Evenboer Walton REALTORS
David Veenstra, REALTOR
Jason Veenstra, REALTOR
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