www.lasvegasmtg.com Report: FHA Proposed changes to Annual MIP
www.lasvegasmtg.com Report: FHA Proposed changes to Annual MIP (Mortgage Insurance Premiums) will impact greatly on how much home the average Las Vegas home buyer will be able to qualify for when the increase gets approved by Congress.
Congress requires FHA to have in its reserve $2.00 for every $100 it insures but this required reserves is now only 24 cents per $100 after its fiscal audit that was done in November 2011. Due to the shortage of the required reserve's Congress has the the ability to raise the amount FHA can charge by passing a bill authorizing FHA to increase the Upfront and the Annual Mortgage insurance premium to insure the lender in case of a default by the buyer. FHA, unlike Fannie Mae and Freddie Mac cannot get bailed out by the US Government but must be self sustained from premiums it collects.
In 1934 Congress created the FHA to help provide home owners get alternative financing from other than banks the required 50% down and balloon payments in 3 to 5 years. To make banks more inclined to accept FHA loans FHA guaranteed the bank in case of defaults to make them whole again by paying them 100% on their loss and this was accomplished through Mortgage Insurance.
There has been 5 rate changes in the last 5 years.
In July 2012 FHA reduced the FHA Annual Premium for all FHA Streamlines that were original insured prior to May 31, 2009 to .50 and the upfront Mortgage Insurance Premium to .010.
Example of the effect on consumers.
Purchase price is $250,000
Present FHA annual 1.25% X $250,000 = $3,125.00 / 12 = the monthly premium of $206.42.
Proposed FHA annual 2.05% X $250,000 = $5,125.00 / 12 = the monthly premium of $427.08.
As you can see this may limit the borrowers ability to qualify for a FHA home loan because the MI has almost doubled over the previous MI premium. The Good news is FHA rates are still at record lows and currently are relatively stable for the near future.