FHA PMI Could Go UP January 2013

FHA streamline refinanceFHA is running into more Budget issues…  According to an independent audit just released, they are running in the hole some 16.3 BILLION dollars as of the end of September.   The last 5 times that’s happened, FHA PMI rates have gone up!

The House has already passed the FHA Fiscal Solvency Act of 2012, and while it has not passed the Senate – it would raise the FHA PMI Rates in January from 1.25% to 2.05%.

DOES THAT MEAN FHA PMI RATES ARE GOING UP?

Maybe.  Actually… Certainly.  FHA Announced in it’s report to Congress about it’s PMI “issues” that it intends to increase rates by at least  .10% at some yet undisclosed date in 2013.

The Question: FHA PMI Rates 2013 / HOW MUCH Will FHA PMI Rates Go Up in 2013

FHA itself doesn’t actually make home loans, they just insure them  – and set the underwriting guidelines on what they will insure (and what those rates will be). The purpose of the House Bill is to protect the FHA’s mortgage insurance fund.

FHA is responsible for maintaining a balanced budget- so raising the FHA PMI rates (they call it Mortgage Insurance Premium or MIP rates)  could help shore up reserves.  The long term hope is that “private” investors will magically step up and start lending for homes again, freeing the QE dollars for other projects.

There are two FHA PMI fees that a borrower must pay.  An Up-Front FHA PMI charge that  is typically financed into the loan and an Annual FHA PMI fee – which is really NOT paid annually – we break that charge up into 12 monthly payments.

1.25% Versus 2.05%

Assuming WORST CASE and Congress forces FHA to raise rates so that it’s solvent, then FHA PMI rates will go to 2.05% – what does that mean for the average homebuyer in NC?

Here’s an Example on a home with a purchase price of $300,000 with the CURRENT FHA PMI rates:

  • 3.5% down payment = A base loan amount of $289,500
  • 1.75% Up Front FHA PMI charge financed into loan = financed loan amount of $294,566.
  • Current FHA PMI “Annual Fee”  is 1.25% of financed loan amount which = $3,682
  • Divided by 12 monthly payments = $306.84 per month for FHA PMI.

and if the changes are implemented…

  • 3.5% down payment = A base loan amount of $289,500
  • 1.75% Upfront FHA PMI Fees financed into loan = financed loan amount $294,566.
  • The new FHA PMI “Annual fee” of 2.05% of financed loan amount which = $6,038.61
  • Divided by 12 monthly payments = $503.22 per month for Mortgage Insurance.
Could be a pretty dramatic change, unfortunately.  While great for the FHA, it’s not so great for people who are counting on this program to qualify for a loan.
Granted – this change has NOT been adopted by the Senate… but if you’ve been putting off a FHA Streamline Refinance because you were thinking (fill in the blank miracle) was going to happen… it’s looking less likely.
My understanding is that as any changes in the FHA PMI rates go into place, there must be at least a 30 or 45 day notice given.  Meaning, FHA would have to announce exactly what they are going to do 30 days in advance.
Other Alternatives to High PMI Rates?
USDA Loans  and VA loans still offer much lower PMI rates than FHA.  Additionally, there are funds available for those who qualify for a Conventional 3% downpayment loan – the PMI could be LOWER on that Conventional loan than a FHA loan!  YIKES!
If you are looking for a FHA Mortgage loan in NC – please call Steve and Eleanor Thorne 919 649 5058.  We understand the program, we know the guidelines – and we’ll definitely let you know if FHA makes any changes!  Connect with us on Facebook and get all of the news about ways to get today’s best mortgage rates!

Comments

  1. Andy Shores says

    I live in MS and investment property is in AL … can you work with that? Also, need upfront info on what it will cost. I have and about 800 (+/- 15) credit rating with all 3, no delinquencies and annual income of $150K — want to reduce monthly payments.

  2. says

    We can do this for you. You can call us at 919 649 5058. There should not be any out of pocket closing costs, assuming your current mortgage is a FHA loan

I try and answer all questions :)