FHA Increases The Annual Mortgage Insurance Premiums

FHA loans are guaranteed by the Federal Housing Administration against default by the home buyer.  The insurance charged is two fold.  An initial Upfront Mortgage Insurance Premium is charged and is based on 1% of the home buyer's base loan amount no matter what the term of the loan. 

The current UFMIP is calculated at 1% of the loan amount.  So if you had a base loan amount of $100,000, the final loan amount would be $101,000 and this is used to calculate the monthly P&I portion of the payment. 

In addition to the UFMIP, FHA also charges an Annual Premium which appears in the home buyer's monthly payment along with P&I, Taxes, and Home Owners Insurance.

It is the Annual Mortgage Insurance Premium that has recently changed.  Effective 4/1/2013, FHA will charge an Annual Insurance Premium for loan terms greater than 15 years of:
130 BPS for loans less than or equal to $625,000 and less than or equal to an LTV of 95% / an example would be a base loan amount $100,000 X 1.3%= $1300 / 12 months = $108.33 monthly mortgage insurance included in the buyers payment.
135 BPS for loans less than or equal to $625,000 and greater than an LTV of 95% / an example would be a base loan amount of $100,000 X 1.35%= $1350 / 12 months = $112.50 monthly mortgage insurance included in the buyers payment.

For loan terms of 15 years or less, FHA will charge an annual insurance premium of:
45 BPS for loans less than or equal to $625,000 and less than or equal to an LTV of 90%
70 BPS for loans less than or equal to $625,000 and greater than an LTV of 90%

Although these permium increases make FHA loans less affordable, FHA will continue to be the loan of choice for home buyers who want to make less than a 5% down payment and whose credit scores are to low for conventional financing.
Also effective June 2013, FHA will no longer allow the home buyer to drop the annual mortgage insurance permium from their monthly payment when the LTV has been paid down to 78% or less.  In other words the (Annual) monthly mortgage insurance premium will continue the life of the loan.

Give John Henry Properties a call when you are in the market for a home. Our experience and service make the difference. www.johnhenryproperties.com or Direct Phone 713-248-2498