NOTE : guidelines are subject to change. The information below may be outdated.
Going FHA on your next mortgage? Think quick!
FHA Mortgage Insurance Premiums Rising
For all FHA Case Numbers assigned on, or after, April 18, 2011, annual mortgage insurance premiums will be higher by 25 basis points per year, or 0.25%.
It’s the FHA’s third such increase in the last 12 months — moves that have cost FHA borrowers a collective pretty penny.
Against a $200,000 loan size, the April 18 increase adds $500 to an FHA-insured borrower’s annual cost of homeownership.
Only new FHA loans are subject to the increase, and both purchases and refinances are affected. Existing FHA-insured homeowners won’t face a change.
FHA : 15-Year FHA Mortgages Must Pay MIP, Too
The main reason why the FHA is increasing its annual MIP is because, as a group, the FHA now insures a much larger percentage of the total U.S. housing market.
For example, in 2006, the FHA held a 4 percent market share. By the end of 2010, that share had ballooned to 19 percent. Today, FHA may be backing 30% or more of new housing debt.
Making that many loans can take its toll.
In its official statement, the FHA says that the 0.25% increase to MIP bump will “significantly strengthen” its reserves which, by law, must remain above certain minimum levels. Reserves are low because of the last years’ delinquencies and defaults.
The FHA’s new mortgage insurance premium schedule is as follows:
- 15-year loan term, loan-to-value > 90% : 0.50% MIP per year
- 15-year loan term, loan-to-value <= 90% : 0.25% MIP per year
- 30-year loan term, loan-to-value > 95% : 1.15% MIP per year
- 30-year loan term, loan-to-value <= 95% : 1.10% MIP per year
“30-year loan term” includes 30-year fixed rate mortgages and FHA 5-year ARMs.
To calculate what your FHA monthly mortgage insurance premium will look like starting April 18, 2011, multiply your starting loan size by the insurance premium in the chart above. This is your annual mortgage insurance cost.
To find the monthly number, just divide by 12.
The FHA also charges a 1 percent, up-front mortgage insurance premium at closing. That figure remains unchanged.
Beat The FHA Increase. Give Your Loan Application Today.
Remember, you don’t have to be closed by April 18, 2011 — you only need to have an FHA Case Number assigned, and to get an FHA Case Number assigned, you only need to give a mortgage application.
Beat the increase. to see what rates I have for you. I can assure you they’ll be low, and you’ll get great service, too.
(This post adapted from Bring the Blog, a blogging content service for loan officers and REALTORS®)