FHA Mortgage Insurance Premiums to Change-Payments are going up for NEW Buyers starting 9/7/2010
In April, the upfront mortgage insurance premium (the financed portion paid by borrowers) was raised from 1.75% to 2.25% of the loan amount being insured, making FHA loans more costly upfront for borrowers. For instance, if you were taking out a $200,000 loan, this translated to an increase in your upfront mortgage insurance premium in the amount of $1,000.
Recently Housing and Urban Development (HUD) has said that if they were given the authority to increase the annual mortgage insurance premiums (the monthly amount paid by borrowers), that they could reduce the upfront mortgage premiums to as low as 1%.
That brings us back to the current, legislation, HR 5981,Â whichÂ has now been approved allowing HUD to raise the statutory cap on annual mortgage insurance premiums from 0.55% to 1.55% monthly. Â The HUD commissioner has decided to start at .80-.90% and raise as necessary to the ceiling provided.Â
HUD was quick to respond and the mortgage insurance premiums are already scheduled to go into effect September 7th. Â HUD plans to increaseÂ annualÂ premiums (collected monthly) for FHA mortgageÂ insuranceÂ to .85% for borrowers with loan-to-value ratios up to 95% and to .90% for borrowers with higher LTVs. Â In addition, the upfront or financed mortgage insurance premium as well is set to drop to 1%.
The way premiums are currently structured, a borrower taking out a $200,000 loan with the 3.5% minimum down payment pays an upfront premium of about $4,500, plus $1,100 a year in annual premiums.
In addition, the upfront premium rollback to 1% would mean that the borrower would pay an upfront premium of about $2,000, plus $1,800 a year in annual premiums. The $700 increase in annual premiums would translate into an additional $58 a month on their mortgage payment. Â
FHA Buyers- It will cost less per month to buy that house prior to September 7th, 2010. Â Please get those contracts written and turned into your mortgage professional so that a case number can be ordered prior to this date. Â Have Questions? Contact (407) 359-1255.
Article courtesy of Synergy Mortgage Services, LLC.