If you’re on the fence about purchasing a property in the near future and plan on using an FHA mortgage to buy a home, you may want to do it before April 18, 2012.
Here are the two types of Mortgage Insurance or PMI that is associated with every FHA loan:
1.) Up Front Mortgage Insurance Premium: The current rate on this premium is 1% of the loan amount and is set to rise to 1.75% on April 18, 2012. There is no refund on the upfront mortgage insurance when you sell the home or refinance. It is strictly a cost of doing a FHA mortgage.
2.) Annual or MONTHLY Mortgage Insurance (Which is referred to both ways because the borrower will pay for it monthly – but it’s calculated on an annual basis): The current rate for monthly Mortgage Insurance is 1.15% and is set to rise to 1.25% depending on the loan amount.
FHA loans are still great loans and offer low interest rates that are not credit driven and only require 3.5% down payment. With all the MIP hikes that we have seen in the last 3 years this should open the arena for other conventional loan programs from local banks to help compete with FHA.