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It's official - FHA has formally announced the mortgage insurance changes for FHA loans

By Jeff Belonger

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

September 02, 2010 08:04 AM

fha mortgagee letter pertaining to the FHA monthly mortgage insurance changes

FHA first shared these changes on August 4th, after it had been approved by Congress and then the President signed off on it on August 11th. FHA has finally come out with the mortgagee letter, ML 2010-28, which puts it officially in writing now.

This mortgagee letter is effective on FHA loans in which the case number is assigned on or after October 4th, 2010. This policy will increase the monthly mortgage insurance and decrease the mortgage insurance premiums for purchase money and refinance transactions, to include FHA streamline refinances.

So what are the major FHA changes regarding mortgagee letter 2010-28? - For terms greater than 15 years -

LTV's <= 95% will increase the monthly fee to 85 bps >> Old monthly fee was .50 bps

LTV's > 95% will increase the monthly fee to 90 bps >> Old monthly fee was .55 bps

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

How will this affect new homebuyers?

3 quick examples (these examples are putting the minimum down payment of 3.5%)

On a $275,000 mortgage – the change in payment would be about $70 higher a month

On a $200,000 mortgage – the change in payment would be about $45 higher a month

On a $125,000 mortgage – the change in payment would be about $27 higher a month

Buyers Beware - If you have your eye set on a specific home, or are negotiating on a property, or are very serious about buying soon, you will have 31 days to make a mortgage application before these new changes take place.

FYI in regards to Charlie Ragonesi's comment, #4 - I still don't think that this will move buyers from FHA loans to conventional loanss. Here is my reason why... please read : FHA loans vs conventional loans - The buyer's buying power will only decrease by about $10,000 or so.

These 2 posts I wrote previously below go into more details about the changes and showing more detailed figures.

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

STOP TAXATION? - The new changes for FHA loans are being called : The New Homebuyer Tax

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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!

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

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Jeff Dowler, CRS

eXp Realty of California, Inc. - Carlsbad, CA

The Southern California Relocation Dude

Jeff - this is important information for us, and buyers and sellers, to know about. We can always count on you to get us the latest updates on FHA. Suggested for a feature so that more can learn.

Jeff

Sep 02, 2010 04:17 AM

Gary Woltal

Keller Williams Realty - Flower Mound, TX

Assoc. Broker Realtor SFR Dallas Ft. Worth

Jeff. it seems if the new rules impact the monthly payment as you described it will still be tougher to get into a house.

Sep 02, 2010 06:27 AM

Susan Mangigian

RE/MAX Preferred - West Chester, PA

Chester & Delaware County Homes, Delaware and Ches

Jeff, thanks for this.

Sep 02, 2010 07:53 AM

Charlie Ragonesi

AllMountainRealty.com - Big Canoe, GA

Homes - Big Canoe, Jasper, North Georgia Pros

Thank you Jeff for the update and this good nformation. There are too maNY FHA'S OUT THERE MAYBE THiS WILl MOVE SOME TO CONVENTIONAl

Sep 02, 2010 08:09 AM

Missy Caulk

Missy Caulk TEAM - Ann Arbor, MI

Savvy Realtor - Ann Arbor Real Estate

Thanks Jeff, I reblogged for my Ann Arbor Area home buyers.

Sep 02, 2010 08:32 AM

Petra Norris

Lakeland Real Estate Group, Inc. - Lakeland, FL

Realtor, Lakeland FL Homes for Sale

Jeff - thanks for keeping us updated for the latest FHA guidelines.

Sep 02, 2010 08:57 AM

Jeff Dowler, CRS

eXp Realty of California, Inc. - Carlsbad, CA

The Southern California Relocation Dude

Jeff - just linked to this from my First Time Buyer Central blog. Good stuff

Sep 02, 2010 09:12 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

JEFF... . my pleasure and thanks for your support and for suggesting this. .. and yes, we do need to get this out to everyone in the industry, most of all, to the buyers.

GARY.... . in my opinion, it won't make it that much tougher... in many cases, you are talking about a reduction in price by about $10,000 or so... but it will hurt some depending on the market and the price cut offs. thanks

SUSAN... . my pleasure and thanks for stopping by.

CHARLIE.... . well, as I showed in this example, FHA loans vs conventional loans, in my opinion, it won't change people from going to FHA to conventional. But thanks for your input.

MISSY.... . my pleasure and thanks for your support and for reblogging this.

PETRA.... . thanks for stopping by and my pleasure.

JEFF... . thanks for coming back and for linking this to you first time buyers blog.. and thanks for the compliment.

Sep 02, 2010 09:59 AM

Damon Gettier

Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA

Broker/Owner ABRM, GRI, CDPE

Jeff, thank for posting! I found it on Missy's page and I followed to you. Hopefully you will get a feature out of it! I will re-blog also!

Sep 02, 2010 03:18 PM

Ruthmarie Hicks

Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Jeff - I saw your Agent Genius post - and now this. I reblogged and suggest it for a feature! Thanks as always for the up-to-date information.

Sep 02, 2010 04:16 PM

Julia Odom

Select Realty Professionals - Chattanooga, TN

Chattanooga Homes for Sale

Am I reading this right? UFMIP will be 1% instead of 2.25%? Over the course of 4+ yrs of payments, they'll be paying more but not by a lot. Plus if they have to sell, the mortgage balance will be ever so slightly lower.

I actually see it as a little of a positive, but then I despise UFMIP with a white hot passion.

Sep 03, 2010 02:03 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

DAMON... . thanks and yes, I read your comment on Missy's reblog... thanks and it doesn't look like it will be featured... AR need to spread around the features and this is already 24 hrs old to them. But seriously, thanks...

RUTHMARIE.... . my pleasure...thanks for noticing this post and for suggesting it...

JULIA... . there is always some sort of positive out of many things... but depending on the purchase price, that payment could increase anywhere from $25 a month more to over $100 month more...

Not sure if you read this post, Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium, but I show a chart that explains the break even point and how much more you would be spending two years after that... just because you are still spending more a month. It's a tad confusing, but FHA knows what it's doing and in the long run, you will spend more total. thanks

Sep 03, 2010 03:37 AM

Julia Odom

Select Realty Professionals - Chattanooga, TN

Chattanooga Homes for Sale

I didn't read the other post (but I will now) and yes I do understand all of the payback period, etc and that FHA will collect more in the long run, assuming the buyer doesn't sell or refinance quickly. I just really hate UFMIP enough to see the silver lining in this cloud.

Sep 03, 2010 03:50 AM