Fha Mortgage Insurance | NC FHA Expert

FHA PMI Changes 4/18/2011 – Again

FHA Announced that they will be changing their Mortgage Insurance Premiums (sometimes called MIP or PMI) again effective April 18, 2011. This change, like so many others is not going to make the program any cheaper!

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.

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 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 downpayment – 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

How do I know what the BPS means to my monthly payment??

In the simplest of terms (for these purposes) here’s how you calculate it:

Sales Price is $300,000

3.5% Downpayment makes your Loan Amount $289,500

Multiply $289,500 by 1.15% which equals $3,329.25 per month. Divide that by 12 months – and your 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. Here’s the letter from FHA about all of this.

My personal feeling is that these premiums are too high… but that is what the government is aiming for. They want more Banks and PRIVATE Mortgage Insurance Companies to be in the mortgage arena. The good news is that house prices are SOOOO low – that even with the higher mortgage insurance premiums – there’s good value available!

If you have questions about purchasing a home and qualifying for a FHA mortgage loan in NC – please call Steve and Eleanor Thorne! 919-649-5058

FHA PMI Changes 10/4/2010

For about the 5th time in the last 36 months FHA is changing the way it charges Mortgage Insurance. While this is a pretty major shift in the Way Mortgage Insurance is calculated for FHA, it’s only about a net $20 per $100K borrowed difference.

HISTORY of FHA’s PMI (Mortgage Insurance)

First off, it’s not called PMI. FHA doesn’t MAKE mortgage loans, they insure them. The mortgage insurance that they charge is referred to as MIP (cleaver I know, Mortgage Insurance Premium). I refer to it in my blog posts as FHA’s PMI... well because from a Consumer’s standpoint it works just like PMI, and most people are familiar with that term.

MIP has been charged TWICE to borrowers for YEARS. FHA collects an UpFront Mortgage Insurance Premium that’s gone from 1.5 to 1.75 t 2.25 to 1% of the loan amount. In years past they’ve refunded part of this UpFront Premium… so if you took out a loan in say 2002, and then you paid that loan off through a refinance in 2004… you received a substantial chunk of that premium back.

Then the Economy went south, and with the changes they made in 2008, they did completely away with the refund…

The other way FHA collects the premium, is in the MONTHLY MIP premium. In year’s past, that MIP collected on a monthly basis for loans with less than a 5% downpayment was.55%. For loans where the borrower made more than a 5% downpayment, the MIP was .50%.

How These Changes Compare to the new October 2010 MIP Rates

Okay, because I can pretty easily do the math in my head, let’s compare the “old” rates for FHA Mortgage Insurance to the “new” rates based upon a $100,000 sales price with a “fictitious” mortgage interest rate of 4.25%.

DownPayment	Upfront MIP	Monthly MIP	Loan Amount With Upfront MIP	Total Payment with MIP	Difference
	NEW Method of Calculating MIP
3.5%	1%	$75.75	$97,465.00	$555.22	+ $24.60
5%	1%	$67.96	$95,950.00	$539.97	+ $21.64
	OLD Method of Calculating MIP
3.5%	2.25%	$45.22	$98,671.00	530.62
5%	2.25%	$40.47	$97,137.00	518.33

These numbers, at $100,000 Sales Price don’t look that dramatic… Let’s take the same format, and change the Sales Price so that we can take advantage of the maximum Loan Amount for Wake County, NC $295,000.

So with a Sales Price of $305,000 the numbers look like this…

DownPayment	Upfront MIP	Monthly MIP	Loan Amount With Upfront MIP	Total Payment with MIP	Difference
	NEW Method of Calculating MIP
3.5%	1%	$222.95	$297,268.00	$1685.33	+ $66.93
5%	1%	$210.56	$297,268.00	$1672.94	+ $67.08
	OLD Method of Calculating MIP
3.5%	2.25%	$137.93	$300,947.00	$1618.40
5%	2.25%	$125.39	$300,947.00	$1605.86

Well… what do you know? It’s STILL not that dramatic a difference. I know my peers are on Facebook, and sending around video saying that this is a “Tax” on home owners. It’s not. It’s a way for FHA to get the cash flow they need, while mortgage loans are defaulting.

HERE’s what I think is interesting! You can buy a house with 2723 square feet, in Raleigh, 4 bedrooms, with a 2 car garage built in 2009 for $219,000. With these new FHA calculations, and with today’s interest rates, your down payment is $7,665 (this can be a GIFT) and your TOTAL monthly payment, including Homeowner dues, and taxes and insurance and EVERYTHING is still less than $1050 a month!

If you have pretty good credit (scores above 620) and not more than $350 a month in debt – a family making only $38,000 a year qualifies for this house! Now THAT my friends, is something to get excited about!

If you are considering a FHA mortgage loan in NC, and you want more information about qualifying for a FHA mortgage loan in Cary or Raleigh NC - please call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5057. We know FHA Mortgage Programs, and we have the best Mortgage Rates available!