FHA Announced that they will be changing their Mortgage Insurance Premiums AGAIN, effective April 18, 2011.
FHA does not underwrite mortgages - they insure them against default, just like Private Mortgage Insurance Companies. Because of this, they determine their own guidelines for underwriting the file, and they set their own rates.
There are currently two types of Mortgage Insurance or PMI associated with every FHA loan we make.
Up Front Mortgage Insurance Premium (sometimes referred to as UFMIP): The current rate on this premium is currently 1 percent of the loan amount. At THIS TIME, if you sell the property or refinance it – you will NOT get a refund of the fee as you did in year’s past. Up Front MIP is not changing.
Annual (or Monthly) Mortgage Insurance Paid for monthly but it's calculated "annually" so it's most often referred to as "Annual" The new rate for this FHA Mortgage Insurance Premium varies depending upon a) your downpayment; and b) the length of your loan term.
Annual Premiums for Loans Longer than 15 Years
If you borrow 95% of the value of the home or Less 1.10%
If you borrow MORE than 95% of the value of the home 1.15%
Annual Premiums for Loans 15 Years or Less
If you borrow 95% of the value of the home or Less .25%
If you borrow MORE than 95 percent of the value of the home .50%
What does this mean to you? See the example chart below. If you are applying for an FHA loan and you've already been pre-approved using FHA, you will want to ensure this change does not disqualify you for loan approval you were seeking OR affect your personal monthly budget. If you have a contract already, you will want to ensure your lender has already secured your FHA Case # not later than today.
*Chart above is from HUD's Mortgagee letter.
For more information I've provided a link to HUD's Mortgagee Letter HERE detailing the changes ahead. Thanks for reading and contact me with any questions you may have or for RE-pre-approval.