Admin, Articles by Topic, Featured Post, Finance, Front Page Feed, General, Insurance, Mortgages, Title & Escrow

Very Important Update Regarding FHA Financing

Here is the latest information on FHA Mortgage Insurance increases:

FHA publishes MIP changes ( http://bit.ly/acon4I )

Main points:

• • Effective for case numbers assigned on or after October 4^th, the new MIP structure will be implemented.
  • Upfront premium will be 1% for all forward mortgages (purchases and refinances including streamlines)
  • Annual premium
    • Over 15 year terms
      • 90 bps for LTVs over 95%
      • 85 bps for LTVs of 95% or less
    • 15 year term or less
      • 25 bps for above 90% LTV
      • No annual premium for 90% LTV or less

So what does this mean for you and your clients?

On a $200k loan amount at today’s annual FHA MI rate is $91.67 per month in mortgage insurance (MI).

On a $200k loan amount at the new annual rate is $150.00 per month, an increase of $58.33 per month.

On the surface, a reduction in the upfront MI sounds like a nice trade off for the increased annual mortgage insurance right?  Well…let’s take a look at that.  On a $200k loan amount that reduces the upfront MI by $2,000 that was rolled into the loan so it reduces the P&I payment by about $6.00 per month.  Sounds good so far right?

But with the increased annual MI the overall PITI payment goes up by more than $52.00 per month.  Over the next 10 years, before that MI drops off on it’s own, the buyer will pay over $6,000 in additional annual mortgage insurance premiums.

Since mortgage insurance is a pure finance charge that directly increases the APR, it essentially and very directly increases the cost of financing to your buyers.  Not to mention the increase in the debt to income ratio which could have some clients looking for a less expensive house or simply not qualifying to buy.

This basically makes the cost of FHA financing for the buyer more than $4,000 higher in the first ten years.  And if that isn’t a new tax, I don’t know what is.

This change is set to take place for FHA case numbers assigned on or after October 4th, 2010.  October 4th is a Monday.  Make sure your case number is assigned by Friday October 1st, 2010 to avoid the increase.

Please feel free to call me with any questions.  If you find this information to be a great reason to contact your database, I always appreciate your referrals.

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | Phoenix Homeowner’s PIT Stop Blog
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742
Click here for the HUD Cost Settlement Booklet

Watch The Video – Milton Friedman:  Liberty and Equality?