Separating FHA Fact From Fiction : Mortgage Insurance Premiums

Real Estate Agent with Realty ONE Group Calif BRE # 00581357

FHA asks Congress to raise Monthly MIPThe mortgage lending landscape changes a lot. Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers that aren't paying in cash.

The loan you get today won't always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of "what's coming next".

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines. Specifically, it announced 3 changes that will be effective starting April 5, 2010:

  1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
  2. Allowable seller concession reduced from 6% to 3%
  3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums. This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA's petition.

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, that doesn't mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and mortgage expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

Comments (2)

Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team

This is really good information, thanks for sharing it.  There are so many fictions out there... good to educate the consumers and agents.

Feb 10, 2010 03:59 PM
Bob Phillips
Realty ONE Group - Coto de Caza, CA
CDPE, SFR, South Orange Co., CA

Thank you, Rosemary and Rick.  Have a great day!

Feb 16, 2010 02:49 AM