The Senate late Wednesday passed a bill that will make an upward adjustment in the overall cost of the FHA Mortgage Insurance Premium. FHA has an Upfront Premium which is financed into the loan amount and and Annual Mortgage Insurance Premium which is added to the monthly payment. The current Upfront Premium is 2.25% of the base loan amount. The Senate Bill will lower this premium to 1%.
The Annual Premium is currently .55% of the base loan amount. The Senate Bill will increase this amount to .9% (with the authority for HUD to increase it to as much as 1.55%). The affect on a buyer's monthly payment is calculated by annual premium (.9%) X base loan amount = annual premium cost / by 12 months to arrive at the annual premium included in the monthly payment.
Even though the upfront premium has been reduced substantially, the increase to the annual premium will cause a net increase in the borrower's monthly payment. As an example, a buyer with an initial base loan amount of $150,000 will have an increase in the overall monthly payment by $33.68. Calculations were based on a 30yr loan @5% intertest.
The purpose of this increase is to restore the FHA Mortgage Insurance Fund to a congressional mandated level.
President Obama is expected to sign the bill and the effective date will probably be September 1st.
Also under review is reducing the allowable seller contributions from 6% of sales price to 3%. This will be considered separately and will probably be in affect by January 2011.
If you're selling or purchasing real estate, let John Shellington provide you with the knowledge and experience you deserve. I want to be "your" realtor.
To post a comment on this blog post, you must be an HAR Account subscriber, or a member of HAR. If you are an HAR Account subscriber or a member of HAR, please click here to sign in. If you would like to create an HAR Account account, please click here.
Erase note
You currently have no custom folders