If you’re beginning the process of buying your next home, it’s time to get moving if you’re considering a FHA loan. The Federal Housing Administration has recently announced increases for FHA Annual Mortgage Insurance Premiums (MIP), and Upfront Mortgage Insurance Premiums (UFMIP).
But FHA insured loans are now popular because guidelines require a minimum credit score of 580 with a minimum down payment of 3.5% of the sales price. According to the FHA, loans have increased from 4.5% in 2005 to 40% of housing purchases in 2010. This has appears to be the catalyst for raising the MIP for FHA loans for the fourth time in 2 years. The latest changes involving both MIP and UFMIP are as follows: The Federal Housing Administration has made these adjustments to encourage the return of private investment into the residential mortgage market. Increasing MIP has become necessary to secure the FHA Mutual Mortgage Insurance Fund. This new infusion of cash will help recover from recent borrower defaults. These higher MIP rates will impact first-time home buyers the worst because they will have a tough time producing a 20% down payment necessary to qualify for mortgages without required insurance.
These are the latest changes to FHA mortgage insurance premiums:
(1) FHA insured loans obtaining case numbers on or after April 1, 2012 will have premium increases of 0.10% for all loans under $625,500. This increases MIP from 1.15% to 1.25% of the loan.
(2) FHA loans from $625,500 to $729,750 will have 0.35% insurance increases beginning on June 1, 2012. This will bring the MIP ratio to 1.5% of loan value. The MIP will be 1.45% of the loan amount with a minimum down payment of 5%. MIP increases to 1.5% for down payments of less than 5%.
(3) The FHA Upfront Mortgage Insurance Premium will increase 0.75% to 1.75%. This applies to all FHA loans up to $729,750 (regardless of loan terms or ratios). This can be financed into the loan.
(4) The simple explanation for these increases will cost the home buyer an extra $1,500 UFMIP, and an annual increase of $200 MIP (divided monthly) on a 200,000 loan.
(5) The new schedule of annual MIP payment percentages are listed below. To calculate your annual MIP, multiply your beginning balance by your loan size (listed above). Then divide by 12 (months).
- 15 yr. loan with 90% loan-to-value ratio: 0.60% annual MIP.
- 15 yr. loan with less than 90% loan-to-value ratio: 0.35% annual MIP.
- 30 yr. loan with more than 95% loan-to-value ratio: 1.25% annual MIP.
- 30 yr. loan terms with less than 95% loan-to-value ratio: 1.20% annual MIP.
(6) Listed below are submission requirements which will change on April 1, 2012 when applying for FHA insured loans:
- Judgments involving identity theft must be accompanied by a police report.
- Judgments must be completely paid unless a payment agreement with at least 3 payments to the creditor has been made.
- The applicant cannot pay down judgments under $1,000 to avoid making payment arrangements or completing eliminating debts.
- Self employed applicants must give a profits and loss statement(s), and balance sheets.
- Disputed accounts less than $1,000 must be resolved.
(7) Annual MIP payment requirements are terminated when the loan balance equals 78% of the original sales price or appraisal value (determined by the lower value). There must be at least 5 years of MIP payments for annual payments to be released.