FHA Announced new the FHA PMI changes to the FHA PMI rate, again, April 2013.
There are currently two types of Mortgage Insurance or PMI associated with every FHA loan we make.
Up Front Mortgage Insurance Premium (sometimes referred to as UFMIP): The current rate on this premium is currently 1 percent of the loan amount. At THIS TIME, if you sell the property or refinance it – you will NOT get a refund of the fee as you did in year’s past.
Annual or MONTHLY Mortgage Insurance (I’ve seen it referred to both ways because the borrower will pay for it MONTHLY – but it’s calculated on an annual basis): The NEW rate for this FHA Mortgage Insurance Premium varies depending upon your down payment – and the length of your loan
Annual Premiums for Loans Longer than 15 Years
(So 20 and 30 year mortgage loans)
If you borrow 95.000% of the value of the home or Less 110 BPS
If you borrow MORE than 95 percent of the value of the home 115 BPS
Annual Premiums for Loans 15 Years or Less
If you borrow 95.000% of the value of the home or Less 25 BPS
If you borrow MORE than 95 percent of the value of the home 50 BPS
What do these “BPS” mean to your monthly payment??
In the simplest of terms here’s how to use these numbers to calculate the FHA mortgage insurance since April 2011:
Sales Price is $300,000
3.5% Downpayment makes your Loan Amount $289,500
First, multiply $289,500 by 1% for the UpFront charge. This makes the “new” loan amount $292,395. You multiply this “total” loan amount by the annual insurance rate of 1.15% – which equals $3,329.25 per year. Divide that by 12 months – and your monthly Mortgage Insurance payment is roughly $277 a month.
If you apply for a mortgage PRIOR to April 17, 2011 (meaning the CURRENT rate), your monthly Mortgage Insurance payment is $229 on that mortgage. Remember, however that the Upfront charge for the Insurance is significantly higher.
FHA does not underwrite mortgages - they insure them against default, just like Private Mortgage Insurance Companies. Because of this, they set their own guidelines for underwriting the file, and they set their own rates.
FHA’s made MULTIPLE changes to the upfront and annual Insurance rate in the last 3 years. It’s important to understand why FHA is making the changes, and what the government is aiming for. The goal is to bring more Banks and PRIVATE Mortgage Insurance Companies to be in the mortgage arena.
Want to know when FHA PMI will stop, or get cancelled from your Loan? Great Question! It will depend on when you took the mortgage out. If you get a mortgage after June, 2013 – then the FHA PMI will be on the mortgage for the life of the loan, no matter what your equity position is. If you got the loan prior to June, 2013 – then it’s a matter of getting to a 78% equity position,
The good news is that house prices are SOOOO low – that even with the higher monthly mortgage insurance premiums – homes are still very affordable , and there’s great VALUE too!