HUD Increases MIP
The Department of Housing and Urban Development (HUD) has announced effective April 18th, 2011 an increase in the Annual Mortgage Insurance Premium (MIP) for all new loans registered on or after that date. The new monthly MIP factor will be 1.15%
In 2010, HUD increased the monthly MIP from .55% to .90%. At the same time HUD lowered the Up-Front MIP from 2.25% to 1.00%. The Up-Front MIP remains at 1.00% when the change takes effect April 18, 2011.
Example of the Annual Mortgage Premium Increase on a $400,000 Loan
.55% = $183 Monthly Payment
.90% = $300 Monthly Payment
1.15% = $383 Monthly Payment
Example of the Up-Front Mortgage Premium Decrease on a $400,000 Loan
2.25% = $9,000 Up-Front MIP
1.00% = $4,000 Up-Front MIP
In a one year time period the cost of the Annual MIP on an FHA loan has increased by $200 for the buyer's monthly payment. However, the cost of the Up-Front MIP has decreased by $5,000. Since the majority of all FHA buyers finance into their loan, the Up-Front MIP, they don't feel the reduction offsets the impact of the increase of the monthly payment. HUD stated the reason for the increase was "So FHA can continue its historic role of providing a home financing vehicle during periods of economic volatility and its mission of helping underserved borrowers".