The Department of Housing and Urban Development announced plans last week to adjust mortgage insurance premiums and limit available funds for senior obtaining a reverse mortgage. HUD officials are taking steps to limit the liability of the Federal Housing Administration's insurance fund. The changes take effect on October 2 – loans originated in September will be grandfathered into the current guidelines.
The most significant changes will be how much mortgage insurance borrowers will need to pay to HUD and new limits on how much they can borrow from their home's equity. The minimum FHA upfront mortgage insurance premium will increase from 0.5 percent to 2 percent of a home's value and access to funds will decrease by roughly 20 percent based on today's FHA floor rate. The increase in closing costs and decrease in available funds will equate to a very significant dollar amount.
Reverse mortgages allow those 62 or older to use the equity in their home to eliminate monthly mortgage payments and access additional cash.
Meanwhile, conforming no-point 30-year fixed mortgage rates averaging 3.875 percent while 15-year rates are near 3.125 percent.
Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.