Colorado FHA Home Loans
FHA loans are insured by the federal government, which means that they represent a lower risk for lenders which translates to a number of benefits for you, the borrower.
Find here a link to the loan limit increases by State and County for 2016: Loan limit increases in 2016 for FHA loans.
Should I take out an FHA loan or a regular loan?
The answer depends on your financial condition, job history, credit and several other factors. While FHA can be particularly flexible regarding the guidelines you must meet, there are disadvantages. The most impactful difference is called UFMIP (Up-front mortgage insurance premium) and MIP (Monthly insurance premiums).
The current cost of UFMIP is 1.75% of the loan amount regardless of credit.
An example: If you are purchasing a home for 200,000 in Colorado, you must initially pay a one-time payment (or finance the payment into the loan) of $3500. This is the cost of doing business with FHA. The second insurance you must pay is the MIP. Currently the MIP payment for the 200k loan, if you are putting 3.5% down, is 1.30% per year. This amounts to $216.60 per month of extra insurance. Below is a chart of the old vs. new MIP rates:
Does FHA monthly mortgage insurance last forever?
Answer: Most likely yes. This is another difficult pill to swallow. If you take out your loan today, you’ll have to pay mortgage insurance until it’s paid off for a 30 year mortgage or for 11 years if it’s a 15 year mortgage. No longer can you ask for mortgage insurance to be removed after paying down a certain amount of the loan.
If you’re refinancing a loan that was taken out before June 3rd, 2013, you may be able to eliminate MI. The table below outlines the new changes which take effect for any loan taken out after June 3rd, 2013.
Follow this link for a detailed chart of the FHA MIP fees: FHA mortgage insurance chart 2015-2016. The way you can eliminate FHA mortgage insurance is to refinance out of the loan when you have more than 20% equity.
To conclude, FHA loans are still a great option for home buyers. They require little down, have low rates and more flexibility. However, it is very important you speak with your Mortgage Advisor to determine if and FHA loan is necessary. The first choice is usually a conventional loan. They have stricter guidelines, but the monthly mortgage insurance is generally less and there no UPMIP.
For the Colorado FHA Loan Mortgage increase chart as of November 17, 2015 Colorado FHA loan limit chart by County for 2016
Contact us at your convenience to apply or ask any questions you may have.