For the third time in 12 months, the FHA is changing its mortgage insurance costs.Â
Effective for all FHA case numbers assigned on, or after, April 18, 2011, annual mortgage insurance premiums (MIP) will increase 25 basis points.
The change will add $250 to an FHA-insured homeownerâ€™s annual loan costs per $100,000 borrowed, and applies to all borrowerâ€™s equally. Current FHA borrowers are unaffected.
To understand the FHA is to understand why premiums are rising.
As an institution, the Federal Housing Administration plays a much larger role in the U.S. housing market today than it did just 5 years ago. According to its own records, the FHAâ€™s percentage of purchase money business in Nebraska and nationwideÂ expanded from 4 percent in FY 2006 to 19 percent in FY 2010.
Rapid growth like this has strained the FHAâ€™s capital and, indeed, in its official statement, the FHA alludes to this, stating that the MIP increase will â€œsignificantly strengthenâ€ its reserves.Â By law, the FHA must maintain a certain minimum level of reserves.
FHA mortgage insurance varies by loan term, and by loan-to-value and,Â beginning April 18, 2011, the new insurance premiums are as follows:
To calculate your monthly mortgage insurance premium, multiply your starting loan size by your insurance premium, and divide by 12.Â
There is no change planned to the 1 percent upfront mortgage insurance premium charged by the FHA.