The Federal Housing Administration (FHA) made changes to their policies for mortgage insurance premiums in 2013. Prior to the policy changes, borrowers with an FHA loan could eliminate mortgage insurance once the have had the loan for five years and have a loan-to-value ratio of 78 percent. Since the policy changes were made, mortgage insurance is now required for the entire life of the loan in most cases.

If you are considering using a FHA loan to finance a new home purchase, the monthly mortgage insurance premium that will come along with the loan is something to really consider. The FHA loan program is a great option for homebuyers that cannot come up with a 10-20 percent down payment and for homebuyers that do not have a perfect credit score.

When applying for an FHA loan, make sure your lender also provides pricing for mortgage insurance. Be informed of what the MIP policies will add onto your monthly mortgage payment as well as how long you will be required to pay for mortgage insurance. Also take into consideration what the costs associated with a conventional loan will be.

Interested in finding out which loan option is the smartest choice for you? Give Prospect Financial Group, Inc. a call today at 858-605-0952.