They’re doing it again! FHA will be increasing Mortgage Insurance Premiums (MIP) by .10%.
Currently, for a 30-year term mortgage with a loan amount of $625,500 or less, the annual MIP rate is:
- 1.25% when Loan-to-Value ratio is > 95%
- 1.20% when Loan-to-Value ratio is <= 95%
The annual MIP rate will increase to 1.35% and 1.30%, respectively. If your loan amount is $500,000, this will increase your monthly payment by over $41/month.
The Upfront Mortgage Insurance Premium of 1.75% will remain the same. FHA has implemented steady but significant increases to the insurance premiums in the past few years in an effort to build up their capital reserve, but this has increased monthly payment costs to borrowers and homeowners across the board. If you already have an FHA loan, don’t worry; you are locked in on your agreed-upon MI rate.
FHA has some wonderful advantages in allowing people to get their foot into their first home, and allowing others to refinance when they do not qualify for a Conventional loan, but these advantages come at a premium. Some highlights and advantages of an FHA, government-insured loan:
- Down payment as low as 3.5%
- For a refi, as little as 2.25% equity is allowed
- Loan Amount up to $729,750 in high cost areas
- Credit score as low as 620
- Foreclosures and short sales 3+ years ago are okay
- Gaps in employment considered more liberally
- Adjustable Rate Mortgage caps and margins are more attractive than Conventional loans
Rumor also has it that FHA will require borrowers to pay the insurance premium for the life of the loan. Currently, you can cancel MI once you reach a 78% Loan-to-Value ratio and have paid MI for a minimum of 5 years. I’m not sure where this will go, but will keep you posted.
