FHA Changes

The up front MIP (mortgage insurance premium) and monthly MIP rates charged on a new FHA loan are about to change, beginning April 9, 2012. If you are planning to purchase a home with an FHA loan, and you aren’t in escrow on a home yet, this post is for you.

Dan Green, a loan officer with Waterstone Mortgage and author of the blog The Mortgage Reports, wrote an excellent summary of the upcoming changes in one of his latest articles, “In Plain English : The April 2012 FHA Mortgage Insurance Premium (MIP) Rates.” Anyone who knows how complicated a mortgage lending discussion can get will appreciate Dan’s impressive ability to keep his article “in plain English” from beginning to end. I know I did.

In short, the FHA changes will be rolled out in two phases. As I already mentioned above, the first phase will take effect on April 9, 2012, and will apply to all new FHA loans here in Maricopa County. The second phase will take effect on June 11, 2012, but it will only apply to new FHA loan amounts exceeding $625,500. Since the FHA loan limit on a single unit property in Maricopa County is currently (as of the writing of this post) $346,250, this second phase will not affect most buyers looking in the Phoenix housing market. If you are considering buying a multi-unit property in Maricopa County, and want to know what your FHA loan limit would be, Dan Green has a great, free tool you can use.

For an explanation of the second phase of changes to new FHA loans, as well as an explanation of how FHA-backed homeowners whose loans were endorsed prior to June 1, 2009 can lower their mortgage insurance costs by refinancing, go read Dan Green’s article above. Getting back to the first phase, here below is what Dan had to say about the increasing mortgage insurance costs on new FHA loans.

FHA Up Front MIP

Beginning April 9, 2012, all new FHA mortgages come standard with a 1.750% upfront mortgage insurance premium (UFMIP), plus an annual mortgage insurance premium of that ranges from 0.000% to 1.600%, depending on the characteristics of the FHA-backed mortgage.

The new FHA annual MIP schedule is effective for all loans for which the FHA Case Number was assigned on, or after, April 9, 2012.

FHA Monthly MIP

The schedule for loans with terms greater than 15 years (e.g., 20-year fixed FHA, 30-year fixed FHA) is as follows:

  • For loans with LTV greater than 95 percent: 1.250% percent annually
  • For loans with LTV less than, or equal to, 95 percent: 1.200% percent annually

The schedule for loans with terms less than or equal to 15 years (e.g., 15-year fixed FHA) is as follows:

  • For loans with LTV greater than 90 percent: 0.600% percent annually
  • For loans with LTV less than, or equal to, 90 percent: 0.350% percent annually
  • For loans with LTV less than, or equal to, 78 percent: No annual MIP required

Do you have any questions about the upcoming FHA changes and whether they’re going to affect you? Please post a comment below, or contact us here! Either way, let’s talk before April 9th.

Image Credit: lumaxart on Flickr. CC Licensed.