FHA Mortgage Insurance Premium (MIP) Cancellation Changes On 6/03/13
If you are planning to purchase a home this summer, you need to be aware that the FHA loan will include PERMANANT MIP. That means your payment will include mortage insurance for the life of the loan. This could make your monthly payment substantially higher and cause you to afford less home than you could afford otherwise. If you must use an FHA loan due to its low downpayment requirement, it might be wise to do so with the knowledge that you could refinance in the future, if not sell when you're ready to purchase a home with a conventional loan and large enough downpayment to preclude mortgage insurance. However, we don't know what could occur with interest rates over the next few years. It's important to speak with a qualified and trusted lender to get a full explanation of the terms of the FHA loan and what your best approach might be to financing your new home.
One more of the FHA proposed changes in November of last year will be a reality in less than two weeks. The change that I am referring to is the FHA Mortgage Insurance Premium (MIP) Cancellation Changes On 6/03/13. I blogged about this change in February of this year, but feel that a reminder is in order now that it is upon us. Also the chart below is a little easier to understand than the previous one that I posted.
On June 3, 2013 FHA will make the following changes to the Cancellation of the FHA Mortgage Insurance Premium (MIP), for FHA Case Numbers endorsed on or after June 3rd. However, FHA Streamline Refinances on FHA Mortgages that the FHA Case Number was endorsed on or before May 31, 2009 are exempt from this change.
On June 3, 2013 FHA will eliminate the cancellation of the MIP on FHA Mortgage with Terms greater than 15 years, and increase the number of years before the MIP can be eliminated on FHA Mortgages with Terms less than or equal to 15 years. This change will have a long term impact, but in the short term will not be felt until the new FHA Mortgage goes beyond 5 years, since presently the FHA MIP cannot cancel until 5 years and the Principle Loan Balance has been reduce to 78% Loan-To-Value (LTV) . The chart below give a clear explanation of the FHA Mortgage Insurance Premium (MIP) Cancellation Changes On 6/03/13, based on the Term of the Mortgage, and the Loan-To-Value (LTV)
As state in the previous blog on this change, I think that FHA's decision to implement these change is a huge mistake, and a further step backwards for both the Real Estate Market, and the Lending Industry. In a time that we are hoping to motivate Buyers to purchase homes, the FHA Mortgage Insurance Premium (MIP) Cancellation Changes On 6/03/13 will act to demotivate Buyers, and a barrier to the recovery. First Time and Lower Income Buyers will mostly feel the impact of these changes the most, which is ironic because the present administration claims to be an advocate of lower and medium income households. Strange way to show support.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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