Cost of FHA Mortgage Insurance to Increase October 4th
Posted by Paul Gonzales | Visited 1014 times, 2 so far today | Currently 1 Comment »
With the passage of HR 5981 Congress has given the FHA the ability to change the mortgage insurance premiums it charges on FHA-insured loans without any further “acts of Congress”. As a result, the FHA has announced that effective October 4th, the Up Front Mortgage Insurance Premium (UFMIP) charged to home buyers will be reduced from 2.25% of the loan amount to 1.00%. However, the Annual Premium (which is paid monthly) will increase to 85 to 90 basis points. What this boils down to is a higher monthly payment on FHA-insured home loans for the same purchase price. On average the increase in the total monthly payment will be approximately 3.7% higher than under the current FHA insurance scheme.
- For Example: assuming that the buyer rolls the UFMIP cost into their new loan (as the vast majority do), on a $400,000 purchase with the FHA-minimum 3.5% down payment, this change will translate to an increase of about $85 in the total monthly payment of principal, interest and mortgage insurance premium. This change will not apply to certain rare situations such as Title I, HECM, HOPE for Homeowners, Section 247 (Hawaiian Homelands), Section 248 (Indian Reservations), Section 223 (e) (declining neighborhoods), Section 238(c) (Military Impact areas in Georgia and New York).
The intent is to help the FHA rebuild its depleted insurance reserves. An unintended consequence, however, may be to put yet another drag on efforts to rebuild the housing market as the increased monthly cost of an FHA loan means fewer home buyers qualifying at any given purchase price point.
Paul Gonzales, CW Mortgage Lending (760) 746-7388 or paulforloans@aol.com
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