As of April 5, 2010, FHA loans changed their upfront mortgage insurance premium from 1.75% to 2.25% of the loan amount. This was a rude surprise for escrows that did not close on time and completed beyond the cut-off. Additionally, an annual MIP of 0.55% of the loan is charged on a monthly basis.
This annual MIP is automatically eliminated when the loan amount is reduced to 78% of the original purchase amount. The homeowner can request in writing that it be removed when the loan amount is reduced to 80% of the original purchase amount.
Now, the House Financial Services Committee is considering H.R. 5072, the "FHA Reform Act of 2010." This bill would provide authority for the FHA to increase the annual MIP. We are told the FHA increased the upfront and not the annual because of the limits of their authority. If they increase the annual MIP, we are told they will lower the upfront premium.
Just remember - until further notice, a 3.5% downpayment is really a 5.75% cost.
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