If you’re thinking about buying a Minneapolis duplex with an FHA loan, you should act now or it will cost you money.
If you sign a purchase agreement after March 31, 2013, new FHA mortgages with the amount of your mandatory mortgage premium for loans with 3.5 – 10 percent down payments will rise from 1.25 basis points to 130 basis points. This would increase your monthly insurance premium on a $100,000 loan from $104.17 to $108.33.
While that doesn’t seem like such a bad deal, the next piece of information might make you think differently. For all FHA mortgages with less than 10 percent equity when they are placed on a property, you will now pay mortgage insurance for the life of the loan. In other words, for 30 years (unless, of course, you refinance).
Prior to this, FHA borrowers were eligible to have their mortgage insurance premiums waived once they had 22 percent equity in the home or had paid the premium for five years.
Over the life of a $100,000 loan, that adds up to $39,000 rather than the $6500 it would have cost you for five years of mortgage insurance.
Again, you don’t need to have closed on the purchase of a property– only to have come to a written agreement to buy a duplex with its seller.