FHA Changes to Mortgage Insurance Premiums authorized in House Bill HR 5981
FHA, The Federal Housing Administration, has been authorized to increase the Annual Mortgage Insurance Premium per House Bill 5981, passed this week in DC. Here is a letter from FHA Commissioner Stevens on the MIP changes.
It contains good news and bad news. The good news is that the Upfront Mortgage Insurance Premium (UFMIP on your HUD1/Good Faith Estimate) is being reduced to 1.0% from the current level of 2.25%. Now the bad news: The Annual Mortgage Insurance Premium (which is paid monthly by the FHA Borrower) is increasing from .55% to .90% for FHA loans above 95% Loan to value, and from .50% to .85% for FHA Loans at 95% or lower loan to value.
So the important questions are:
When does it go into effect? The new rates will apply to all FHA case numbers dated Sept 7, 2010 and later. FHA Case #'s prior to this date can still qualify for the existing MIP rates.
How does it effect my FHA loan? This will only effect new FHA Loans, existing FHA Loans will adhere to the their current MIP Rates (ie no changes).
Is it more expensive or cheaper than now? The overall cost to the borrower actually increases with the new MIP Rates. On a $100K home purchase, with a 4.5% 30 year fixed FHA Loan, the monthly PIMI (Principal, Interest, Mortgage Insurance) payment will be $566.21 on the new plan. The old MIP rates would have yielded a PIMI of $544.18, about $22 per month lower. You can also extrapolate your effect for your potential loan as this payment sample is per $100K purchased.
Now $22 per month is not the end of the world, but the increased monthly cost of MIP will reduce the homebuying power of Americans in a time we are trying to keep housing strong with good financing options. FHA Jumbo Loans will feel the impact the most, as the loan amounts are much higher (up to $729,750), magnifying the payment increase.
However, FHA Loans still offer huge benefits to qualified borrrowers for many reasons. Check out our next post as we examine why FHA Loans are still a better choice for many homebuyers and refinancers even with the higher MIP rates.
What should I do? If you have been thinking about refinancing with a FHA Loan, purchasing with an FHA Loan, or Streamline Refinancing your FHA Loan, the time to move is now. Call us to get started, and lock in the old MIP rates for your loan before they go up.
Check out the FHA Loan Limits for your County:
Please contact Brian Skaar direct at 760-752-4480 or visit us online to get started now at www.vandykfunding.com.