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Ellen Shaughnessy's Blog

By Ellen Shaughnessy | Broker in Easton, PA

FHA loan rates are going UP, this Month (April 2012)

The FHA loan mortgage insurance premium (MIP) is going up by 0.75%, on April 9th. The up front MIP is generally financed into the loan and spread out over the entire term of the loan.  Consequently the impact of this portion’s rate increase won’t be too severe. However – the annual or monthly MIP is also going to increase by 0.10-0.15% depending on the loan, and by another 0.25% for those with loan amounts that exceed $625,500.

Those that get their FHA case number pulled after April 9th will be affected by this. FHA is doing this to keep the fund solvent and ensure that FHA loans are always available for those that need them. They are still the best loan for many that do not have a large downpayment, but do have a credit score of at least 680 and qualify for the income ratios.

If you put the minimum of 3.5 percent down to purchase your property – then the lender has put up as much as 96.5 percent of the purchase price. This is a high-risk situation for lenders and therefore they collect the mortgage insurance.

How do I drop the monthly insurance payment?

I’ve been asked this question many times by buyers. For FHA loans, there is a minimum of 5 years that you must pay this monthly extra insurance. There are two ways to get out of it: 1) refinance and put at least 20% ‘down’ on the property or 2) reduce the loan to 78% of the original principal amount once you have been paying the MIP for 5 years.  For FHA mortgages over 15 years, assuming that you have in the meantime improved the property and increased its value and/or the value has improved enough, the MIP will be terminated when the Loan to Value (LTV) ratio reaches 78%, provided the borrower has paid the MIP for at least five years. Even if the LTV reaches 78% and the borrower has not paid MIP for at least five years then the borrower must continue to pay MIP until the five year requirement is met.

FHA’s regulations do not permit a borrower to submit a new appraisal to reach the threshold for termination of MIP.

A borrower whose loan reaches the 78% LTV threshold sooner than projected because of prepayment may have the MIP terminated (but not sooner than five years from loan closing for loans with terms greater than 15 years) if the borrower has not been more than 30 days delinquent in paying the mortgage payments during the previous 12 months.

The borrower must submit a termination request to the lender and the lender must provide the borrower’s request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination.

check the HUD website for more on termination of MIP.
If you feel like you are ready for the responsibility of home-ownership and are interested in learning what $ price range would work best for you just contact ellen - prices are low and it is still a really excellent time to buy! I'm located just 65 miles west of NYC ~realSellen.com

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