Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium

Mortgage and Lending with Salem and Bend Oregon FHA, VA & USDA 503.931.4490

I think I do an overall good job with my Blog, but for more detailed info on the FHA changes please see Jeff's Blog as well...and if you haven't done so it as a favorite.

Thanks Jeff!

Original content by Jeff Belonger


fha loans update - fha home loans - fha mortgages

FHA first proposed the monthly mortgage insurance changes in the beginning of 2010. Bill H.R. 5981 was first passed by the House in the spring and was just passed by the Senate the other day.  What does this bill do for FHA mortgages? They have projected that it will yield approximately $300 million per month to the FHA insurance fund.

So what are the new FHA changes? - For terms greater than 15 years -

LTV's <= 95% will increase the monthly fee by 85 bps

LTV's >   95% will increase the monthly fee by 90 bps

And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.

The plan is to go into effect by September 7th, 2010 on all FHA case numbers. FHA gives it's reasons to this new plan. FHA letter from David H. Stevens




So what do the actual changes mean to the average borrower that will rely on FHA loans when purchasing a new home or refinancing?

                - The Old Plan -

LTV's <= 95% will increase the monthly fee by 50 bps

LTV's >   95% will increase the monthly fee by 55 bps



Example of the changes regarding the FHA monthly mortgage insurance known as MMI or annual mortgage insurance premium and the FHA upfront mortgage insurance premium known as UFMIP.


FHA chart for new montlhy mortgage insurance and upfront MIP












As you can see, it would be much cheaper monthly with the old plan, even though you pay $3,317 more upfront, on top of your loan. This can also be a tax write off since it's included in your principal. You break even point on this type of scenario is 47 months, which is roughly 3.9 years. After this break even point, you would have started to spend more money in reality. This is how FHA will increase it's mortgage fund. As you can see, it won't be increased as quickly upfront, but over a longer period of time. So if you held onto this mortgage for 7 years, you would have spent approximately $2,522.

Now, there are several other factors to consider when reviewing this kind of information.  Just for the fact that your original balance on the loan will be $3,317 lower and in 7 years, still be that much lower. And as I mentioned, you would have a little more of a tax advantage on the higher balance though.

All I wanted to do was to present the basics of FHA loans and not get into the extreme details on how one could show either side. What could this do to a potential home buyer?  It could reduce your purchasing power. In this scenario, if you had originally qualified for a $275,000 loan with qualifying ratios of 31/43, what would your new purchase price be.



- New Purchasing Power after September 6th, 2010 -

With the new FHA monthly mortgage insurance and the FHA upfront mortgage insurance premium changes, your purchasing value would drop approximately $10,000, a purchase price of $265,000. Now, these are just averages, because this will all be based on the actual purchase price. Meaning if values are higher or lower, the total amount could change some. But this should give you a good understanding of what changes lie ahead for FHA mortgages in the near future.





follow Jeff Belonger on Twitter               The FHA Expert   

                                                                                                           FOLLOW ME ON FACEBOOK



- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -


Experience & Knowledge at its BEST !!!



Follow me on:

Mortgage Myth Busters




For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!


For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors


Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Comments (1)

Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Travis.. thanks for reblogging this and for getting this out there.  I just read yours and there is no true difference except for my pretty chart... lol  So thanks for the polite introduction..

jeff belonger

Aug 06, 2010 05:14 AM