Important Upcoming FHA Changes
The monthly MIP is going up from 1.25 basis points to 135 basis points. Lets take a house at $150,000. The minimum downpayment is 3.5%, That makes the base loan $144,750, rounded to $144,700. The Up Front Mortgage Insurance Premium (UFMIP) is 1.75% or $2,533.12, This can be and is almost always added to the loan amount. So the total loan amount is $147,233. The old Monthly Mortgage Insurance Premium is 1.25% or $1840.41 divided by 12 to make it monthly at $153.37 a month. The new premium is 1.35% or $1987.64 per year, or $165.63 a month. So the increase is $12.27 a month. No big deal. There more changes to the MIP if you use a 15 year or put more money down. In my experience, most people are putting the minimum down, using the loan because they do not have the money or credit score to go conventional. So this will affect 99.9% of the FHA loans I do. The MIP will fall off after 11 years if you put down 10%, so that may be something people could try as an alternative, I don’t see it happening.
The increase in the monthly MIP amounts is effective with case numbers assigned on or after April 1, 2013.
The Monthly MIP will not be dropped from loans with LTV’s of 90% or more. No matter how long or how low the balance of the loan gets.
The changes regarding how long the MIP will run for is effective for case numbers assigned on or after June 3, 2013.
This is a bigger concern in that many people think and hope that they can drop the MIP at some point. Again, if you don’t pay extra on the loan, The MIP would fall off on current loans on the 114th payment, which is 9.5 years from now. Most people will have sold their house or refinanced by then anyway. However, making it so the MIP NEVER falls off is a much larger deal for people who buy a house and stay in it forever.
Please note the changes take place when the case number is assigned. This happens after a contract is made and usually after loan application. We have a window of time under the old rules, so here is a perfect time to TAKE ADVANTAGE OF IT !!!!!!
The reason for this is FHA is losing money on loans. If they don’t increase the fees the loans could go away. Right now FHA is more than 30 percent of the real estate transactions according to a USA today article.
Call or email if you have questions. Anything financed before April 1, 2013 is under the current rules…..
Tom Floyd Valley Team Mortgage 444-5626 ext 302 537-2022 cell/text