FHA MIP

FHA Increases Annual Mortgage Insurance Premiums Again

In case you missed the big event on April 18th, FHA administered an increase to the Annual Mortgage Insurance Premiums for all forward mortgage terms as instructed in Mortgagee Letter 11-10. You may be wondering why FHA would increase their fees again considering they raised fees last fall.

Per a legislative mandate in section 202 of the National Housing Act to ensure that FHA’s Mutual Mortgage Insurance Fund remains financially stable, an increase in the Annual Mortgage Insurance Premiums was required due to growing utilization of the FHA home loan in real estate transactions especially in Northwest Indiana and the surrounding Chicago suburbs. 

The increase by FHA to the Annual Mortgage Insurance Premiums is only 25 basis points (bps) and it should be noted that the Upfront Mortgage Insurance Premium remains unchanged at one percent of the loan amount. In the chart below you can see the actual increase that transpired on April 18th.

Although FHA calculates mortgage insurance premiums on an annual basis, a borrower actually pays mortgage insurance premiums back on a monthly basis. What kind of impact could this have on your monthly FHA home loan payment in Northwest Indiana and the surrounding Chicago suburbs?

Even though FHA has slightly increased their fees yet again, the FHA home loan is still a great value for home buyers and homeowners looking to refinance. If you are ready to begin your discussion on how an FHA home loan could still benefit you, complete your secured online FHA home loan application today!

FHA MIP

New FHA Mortgage Insurance Premiums Start October 4th

For the second time this year, the FHA is modifying their guidelines on mortgage insurance premiums.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

• Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
• Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners in Valparaiso Indiana and everywhere else, this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”.  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers in Valparaiso Indiana, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different.  Yes, FHA home loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA. 

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your application for an FHA insured mortgage, be sure to call or email me for help.

NOTE : The FHA originally announced an implementation date of September 7, 2010. It was subsequently amended to October 4, 2010.

FHA MIP

6 Things You Need to Know About New FHA Home Loans

With the passing of H.R. 5981 and the resulting Public Law 111-229, FHA was given authority to change the amount charged to borrowers for both the Up Front and the Annual insurance premiums it requires to insure home loans.

These FHA Mortgage Insurance Premium changes are outlined in Mortgagee Letter 2010-28 and become effective for all FHA case numbers assigned on or after October 4th, 2010.

Here are the 6 things that every home buyer or homeowner refinancing needs to know about changes to FHA Mortgage Insurance Premiums:

1. The Up Front premium is now 1.0 % for all standard FHA programs (purchase money mortgages, full credit-qualifying refinances, streamline refinances)
2. The Annual premium is now .90% for LTVs GREATER than 95% on 30 year loans
3. The Annual premium is now .85% for LTVs EQUAL to or LESS than 95% on 30 year loans
4. The Annual premium is now .25% for LTVs GREATER than 90% on 15 year loans
5. The Annual premium is now .00% for LTVs EQUAL to or LESS than 90% on 15 year loans
6. These premiums apply to purchases, regular refinances and streamlines

Please note that this new law also gives FHA the authority to raise the Annual premium at will up to 1.5% for LTVs at or below 95% and 1.55% for LTVs more than 95%.

Change is inevitable – except from a vending machine. - Robert C Gallagher

If you’re uncertain as to how the new law and changes to FHA Mortgage Insurance Premiums could affect your ability to buy a home or refinance your existing home, contact me for a free mortgage consultation.