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MONTHLY COST of FHA MORTGAGES INCREASES TODAY

By Shay Campbell

Mortgage and Lending with Universal American Mortgage Company NMLS 46083

April 18, 2011 04:16 AM

The monthly cost of FHA mortgages increases today. The reason is FHA is increasing its annual premium for mortgage insurance.

FHA breaks their mortgage insurance down into two payments. There is an upfront mortgage insurance premium of 1.00%. FHA allows this UFMIP to be added to the loan amount. Most borrowers do this. FHA also charges, what they call annual premium. This annual premium is broken down into 1/12^th payments which is collected monthly along with escrows for taxes and hazard insurance. This annual premium, which is collected monthly, is increasing 25bps from 90bps to 1.15bps. The increase is approximately 28%.

Using FHA's example in their Mortgagee Letter 11-10, a purchase price of $163.00 will have its annual premium increase from $118.00/month to $151.00/month. This is a change in payment of $33.00 more per month.

For more information contact Shay Campbell. Shay Campbell is a licensed mortgage originator located in Raleigh, NC.

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Jeremy Wrenn

Winslow Homes - Youngsville, NC

VP of Finance, Winslow Homes

Shay, is this what I've heard referred to as "PMI"?

$33/month on the example mortgage seems like a pretty steep increase, almost $400/yr! What is driving the increase?

Apr 18, 2011 06:53 AM

Shay Campbell

Universal American Mortgage Company - Raleigh, NC

Raleigh, NC

Jeremy

Yes but more accurate almost. PMI stands for "private mortgage insurance". This is what the private industry, in today's market mainly Fannie Mae and Freddie Mac, calls their mortgage insurance.

My take on what's driving this is I believe the Federal Government wants to reduce their share of mortgage so they are slowing raising the costs of mortgages they back, FHA and USDA, so Fannie and Freddie mortgages becomes more attractive.

Apr 18, 2011 07:08 AM

Gotcha. So this is a separate insurance on the mortgage. Wow, how many insurances can one mortgage afford?

I can definitely see the government wanting to get out of that business, since they had to write such big debt checks to cover stuff over the last 3 years.

Apr 26, 2011 08:24 AM

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Shay Campbell

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