FHA to raise Upfront and Monthly Mortgage insurance rates as of April 1.
Monday, FHA announced that they would raise their Upfront Mortgage Insurance rate by 1% to 1.75% and their monthly mortgage insurance rates by 0.10 for case numbers after April 1, 2012. In addition, for loan amounts from $625,501.00 to $725,750.00 the monthly mortgage insurance rate will rise another 0.25 after June 1. These changes are being made in order to protect FHA's capital reserves.
How will this affect the FHA homebuyer or homeowner?
For homebuyers purchasing their homes, what it will mean is that they will qualify to purchase a little less home. Since Upfront Mortgage Insurance is can be financed into the loan, this means that payments will be a little higher after April 1 for FHA homebuyers. Also with an increased monthly mortgage insurance rate, total monthly payments will be higher on a home purchased with a case number from prior to April 1.
For homeowners looking to refinance, it will mean that fewer will meet the FHA requirement that they save at least 5% on the total of the principal, interest and mortgage insurance portion of their mortgage payment. Homeowners with FHA loans who might qualify for a Streamline refinance need to speak to their lenders in March or their opportunity to secure a lower rate and payment may disappear for some of them and for those who still qualify after the changes April 1, the savings will be less.
This is a case where he who hesitates is lost!
For more information see FHA's press release.
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