FHA Loan Changes Coming Soon To A Lender Near You - Including FHA 203k

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FHA Loan Changes Coming Soon To A Lender Near You - Including FHA 203k Renovation Loans

The new changes coming to the FHA loan program are just around the corner

A Continuing effort to help strengthen FHA's Mutual Mortgage Insurance Fund 

Changes were released on January 31, 2013 by HUD in their Mortgagee Letter 2013-04.

The changes affecting new FHA case numbers on or after April 1, 2013 relate to the increase in the annual MIP that is charged. FHA will increase its annual Mortgage Isurance Premium (MIP) for most new mortgages by 0.10 percent. FHA will increase premiums on jumbo mortgages 0.05 percent. The chart below shows this in clear terms:

FHA MIP Rate Changes Chart Effective April 1 2013

Chart courtesy US Dept of HUD

So, as you can see, the FHA loan changes will affect ALL loans regardless of down payment amount, even on those putting down 22% or more. These changes will naturally effect the FHA 203k Renovation Loans as well. If someone is putting down 20% or more why not consider conventional loan... Yes, even a conventional renovation loan, we do those too, as low as 5% down payment, and the MIP is lower on conventional, compared to FHA MIP. www.RenovationLoans.org

The second part of the FHA loan changes coming to a lender near you relate to the ability to remove or cancel the MIP after a period of time and/or LTV. In 2001 FHA cancelled  required MIP on loans when the outstanding loan balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance for the life of the loan... So, effective for all mortgages with FHA case numbers assigned on or after June 3, 2013...MIP will remain for the life of the loan, where the original LTV is greater than 90 percent, or 11 years where the original LTV is less than or equal to 90 percent. Chart below, from HUD Mortgagee Letter 2013 - 04 shows the changes coutesy of HUD:

FHA MIP To Remain for the LIFE of the FHA Loan effective June 3 2013

The FHA MIP increases will not effect streamline refinances transactions of existing FHA loans that were endorsed on or before May 31, 2009, HECM, Hawaiian Homelands or Indian Reservations.

These FHA loan changes will certainly cause a stir in the market, which is not starting a nice recovery in most areas. However, borrowers needing or wanting to take advantage of all that FHA has to offer (lower allowable credit scores, gift money, low down payment, etc.) will likely not be dissuaded from using the program.

However, those that have not yet been able to find "just the right home" may find themselves paying a higher monthly payment or looking at homes priced lower, and homes that may need work to be of the standard they were looking at in the higher price points or simply to qualify for any type of mortgage (leaky roof, no heat, no kitchen, wood rot or termites, a green pool, the list goes on). This presents a perfect opportunity to utilize the FHA 203k renovation loans or even the conventional renovation loan, which is offered by Wells Fargo Home Mortgage...see options at www.RenovationLoans.org.

Historically speaking, over the last 12 years, use of the FHA loan program has gone up and down...as can be seen in this chart from HUD's 2012 Annual Report To Congress:

FHA Loan Usage vs Conventional Loan Usage

We can certainly expect to hear a lot more about the FHA loan changes coming to a lender near you as the time gets closer. We will undoubtedly hear a lot of mis-stated information on the changes as well. Please use the links provided here to refer to the actual source for the changes to get the real scoop: HUD Mortgagee Letter 2013 - 04   and HUD Press Release of January 30, 2013 and Annual Report to Congress Fiscal Year 2012 Financial Status FHA Mutual Mortgage Insuarance Fund happy reading!


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Posted by

Homes For Heroes Lending Specialist Dennis Hearing Florida   Clear 2 Close Home Loans Dennis Hearing

Comments (3)

Lori Bowers
La Quinta, CA
The Lori Bowers Group

In my opinion these rates are already too high.

Feb 23, 2013 12:18 AM
Janis Borgueta
Key Properties of the Hudson Valley - Newburgh, NY
LIC RE Salesperson

Wow.. the numbers are high. This will put on the brakes for some buyers. I agree that they are just too high!

Feb 23, 2013 12:29 AM
Dennis Hearing
Clear 2 Close Home Loans Home Loans - Mortgage Broker Florida - Fort Lauderdale, FL
Mortgage Broker Florida

Hi Lori,

rates in the mid 3% range for FHA is too high? 


understand these MIP bps are in hundreds... So right now the monthly MIP for most buyers is going to go up 10 bps or .10% of the total loan amount per year (divide by 12 for the monthly loan payment change), its not huge, but if buyers are already working with a high DTI...and then if we also get an increase in interests rates...now we are talking about something that could be game changing...it is the cost of using the program...

Feb 23, 2013 05:44 AM