A reader asks, "I closed an FHA loan on 02/18/15 and was charged a rate of 1.689% for Mortgage Insurance Premium. The rates were reduced in January-15. Was I charged an incorrect rate?"
This is a common question for some borrowers because their loans happened during a period of time where the change from the old FHA MIP rates to the new rates occurred. The short answer to this reader question is, "It depends". The timing of the assignment of a borrower's FHA case number is key in cases like these.
According to a Frequently Asked Questions page found at HUD.gov, the deciding factor on whether a borrower got the old rate or the new one is the date when the FHA case number was assigned. According to HUD.gov, "The reduction is effective as of January 26, 2015. Borrowers with case numbers assigned on and after January 26, 2015 will be eligible for reduced annual mortgage insurance premiums."
Some borrowers had case numbers assigned already when the announcement of the MIP rate change was made; FHA loan rules provided a temporary means for the lender to cancel the original case number and request a new one in order to let the borrower in on the new, lower MIP rates. From HUD.gov:
"Ive already been approved for an FHA-insured mortgage and have been assigned an FHA case number. How can I take advantage of the new rate?"
"FHA will permit lenders to cancel existing case numbers and assign new case numbers so borrowers who have yet to close on their loans may take advantage of the new premium reduction. The new case number must be assigned on or after January 26, 2015."
If the borrower did not request a new case number and the old case number was issued prior to the cutoff date for the new MIP rate mentioned above, then the "old" FHA MIP rate would apply.
Do you have questions about FHA home loans? Ask us in the comments section.
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