Tuesday, February 15, 2011

FHA to Increase Monthly Mortgage Insurance Premiums

FHA logo

The FHA has announced increase in mortgage insurance premiums (MMI), the FHA monthly mortgage insurance. 

These FHA changes are mentioned in its Mortgagee Letter 11-10 and become effective on or after April 18th, 2011. 

Fannie Mae has a pricing change for conventional loans that becomes effective on April 1st, 2011.  Pricing Hikes for Conventional Loans in April 2011.

FHA is expected to continue with minimum down payment of 3.5 percent.

Why did HUD increase the MI premiums?  The government wants to strengthen the FHA's Mutual Mortgage Insurance Fund (known as the MMIF) and see the fund financially sound.  There is no change to the Upfront Mortgage Insurance premium of 1 percent.

Old as compared with New Monthly Mortgage Insurance Changes

This chart is from Mortgagee Letter 11-10 - Annual Mortgage Insurance Premium Changes - Red arrow shows this goes into effect on April 18th (not April 4th). 

So what does this mean to those refinancing or buying new homes with a FHA mortgage?  (based upon hypothetical of $250k sales price)

It will cost the buyer of the $250k home $50.26 more in total monthly mortgage insurance payment.  Buyers would also have decreased purchasing power by about $9,000.  So instead of the $250,000 purchase price in the example, buyers could now afford a $241,000 home.

This new change is for 1 to 4 unit residential properties.  However, it does not impact Title 1 loans, reverse mortgages, the HOPE loan, and a few other types of FHA loans.  See new FHA mortgagee letter 11-10.

Here is a breakdown of different purchase prices on how much more a mortgage payment will increase because of the new FHA monthly mortgage insurance change.

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Source:  Jeff Belonger The FHA Expert - http://www.fhaloansfhamortgages.com - February 15, 2011 - This is for information only and not the providing of legal, tax or mortgage services.  If you have any questions about FHA home loans and mortgages, please contact Jeff Belonger The FHA Expert

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Harrison K. Long - solutions for real estate and business - REALTOR® and broker associate, GRI, Coldwell Banker Residential Brokerage- 949-854-7747 (phone) - ExploreProperties@gmail.com (email) - CA DRE 01410855 - SFR short sale and foreclosure resource certified by the National Association of REALTORs®.

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