FHA Upfront Mortgage Insurance Premium Going Up in California

Mortgage and Lending with Envoy Mortgage, LTD

Dreaming of the FutureFHA Upfront Mortgage Insurance Premium Going Up in California as of the end of March. What does this all mean...FHA Upfront Mortgage Premium Going Up in California? For your FHA home buyers a lot.

A little history...the FHA Upfront Mortgage Insurance Premium helps keep the mortgage insurance premium that the borrower pays on a monthly basis down to .55% instead of say 1.07%. Years back the upfront mortgage insurance premium was at 2.25% but over the years it was reduced and the lowest, I believe, was 1.25%. Over the past several years it has been creeping up to 1.50% to 1.75% now to 2.25%. 

These premiums pay the bond holders who support the FHA loan program.  FHA Upfront Mortgage Premium Going Up in California is a reflection of the economy as well as a way for the borrower to pay more for the risk that the investor is taking on for the borrower's loan. Remember, the only way an investor gets compensated for the risk they take is through the interest rate and, in this case, the mortgage insurance premium.

Impact on your borrower is many fold. Qualification will have an impact since they will have to qualify for more of a loan amount. Remember the upfront mortgage insurance premium is added to the loan and is therefore paid by the borrower over the life of the 30 year loan. Also this results in the monthly payment going up on a monthly basis.

MoneyFor example, on a $200k purchase with 3.5% down the difference in the payment is $5.32/mo. This means that the borrower will need to make about $15 to $20/mo more depending on credit, etc. That doesn't sound like a lot but for an hourly person that means an average of 1 to 2 more hours per month to qualify for their loan. And this is on a $200K loan, the difference becomes much larger when you are discussing a $729,750 loan.

Also, with this increase this $5.32/mo works out to be a couple grand more over the life of the loan, again on a $200K.

Along with the FHA Upfront Mortgage Premium Going Up, there is discussion about increasing the amount a borrower has to put down on an FHA loan from 3.5% to 5%. Also they are looking at increasing the monthly mortgage insurance premium. All of this is a reflection of the current economic situation and the number of foreclosures, short sales that the FHA program is experiencing.

If you have an FHA purchaser that is sitting on the fence, you might let him/her know that FHA Upfront Mortgage Premium Going Up in California and that other factors may soon be instituted that will impact their monthly payment.

For those of us in the lending industry you might have noticed that an FHA scorecard has been institued in the AUS (automated underwriting system) that is also impacting the approval of your borrowers. What I am finding is that files that would have approved no problem three months ago, will not now. The underwriting guidelines in the AUS have been tighten.

So as you can see for the borrower it isn't just FHA Upfront Mortgage Premium Going Up In California, it is a plethora of other factors that are being applied to make the process of getting an FHA loan more difficult - increase in upfront mortgage premium, increase in downpayment, increase in monthly mortgage insurance premium, tightening up of the underwriting guidelines.

Please counsel your borrowers to find the home they like sooner than later. Because later may cost them.

For more information, contact our team.

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