FHA PMI Changes 4/18/2011 – Again

February 16, 2011 By 5 Comments

On February 27, 2012, FHA Announced that they will change the FHA PMI rates, again, on April 2012.  The rates listed below will be in effect until the end of March, 2012.

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 [Read more...]

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FHA PMI Changes 10/4/2010

August 13, 2010 By 2 Comments

FHA Continues to make changes to their PMI Rates.  Because of the number of defaults – the monthly rates and the upfront rates for FHA Mortgage Insurance continues to change.  We keep this information on the site for folks who received a FHA Mortgage loan on, or around October of 2010.  We do have the most up to date information on the rates – in the event you are CURRENTLY looking for a FHA mortgage loan and want to know what the FHA PMI rates are today.

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!

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DRATS! FHA is Getting More Expensive!

June 15, 2010 By Leave a Comment

FHA Continues to make changes to their PMI Rates.  Because of the number of defaults – the monthly rates and the upfront rates for FHA Mortgage Insurance continues to change.  We keep this information on the site for folks who received a FHA Mortgage loan on, or around June of 2010.  We do have the most up to date information on the rates – in the event you are CURRENTLY looking for a FHA mortgage loan and want to know what the FHA PMI rates are today.

 

As we reported in April, Washington is trying to offset the costs of FHA foreclosures… and so it appears that FHA mortgage Loans are going to get more expensive. Many folks don’t realize that FHA doesn’t really MAKE loans… they just INSURE them.

Last week, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers. This bill passed almost unanimously, and although it doesn’t force FHA to raise the monthly fees, it still means that these loans will likely be more expensive later this year.

Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12. The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent..

Again, the bill does not force FHA to charge the full 1.55 percent, and FHA officials believe that an increase to 0.90 percent would be sufficient to currently cover the cost of these loans.

Here’s the impact on a 200,000 loan:

  • Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
  • Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
  • Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

No doubt, a fairly large increase, like this,  in monthly mortgage insurance premiums will reduce home affordability for buyers in North Carolina and strain some household budgets as people decide if it makes sense to refinance!

FHA charges mortgage insurance two different ways. It charges a monthly fee, and it charges an upfront fee. (for more click here).  FHA’s upfront mortgage insurance changed earlier this year to 2.25%.  This means that if you are borrowing $100,000 your loan amount is $102,250 with the upfront mortgage insurance.  Because higher monthly insurance premiums are expected to cover the default costs,  FHA indicated that it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.

This makes sense, because homes in many parts of the country are going to lose some of their value in the next 12 to 18 months.  Why would you want to go INTO a deal with that much additional costs? On the same $200,000 mortgage, a move like that would reduce the upfront cost by $2,500.

Bottom line, if you are considering a FHA mortgage – you might want to move quickly, because it’s going to get more expensive!  Call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058.  Certified Mortgage Planners in North Carolina!

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Congress Making Changes to FHA Mortgages

April 30, 2010 By 2 Comments

THE FHA PMI Mortgage Rates referred to in this post is OUTDATED.  We have the most Updated FHA PMI information, but keep this post here for the people who got a FHA loan around April of 2010.  For some folks, FHA Mortgage Insurance was refundable – and for others it was not.  FHA has made 9 changes to it’s PMI rate in the last 3 years!

 

The House Financial Services Committee acted yesterday to move forward H.R.5072, “FHA Reform Act of 2010″ which, in part, makes a move to raise the ceiling on annual FHA mortgage insurance premiums.

FHA does not make mortgages loans, they INSURE them. As an INSURANCE Agency, they are required to hold reserves against any claims  - and because the national default rate is still very high, they’ve had tons of claims.  They are required to hold a 2% capital reserve rate, and it had fallen to .53.

FHA’s Mortgage Insurance Premium is kinda’ like PMI.

Earlier this year Congress approved changes to increase the UpFront Mortgage Insurance Premium (MIP) FHA charges to 2.25%. They also changed the amount of Seller Contributions to 3% (from 6%).  The latest changes will increase the amount of MONTHLY Mortgage Insurance Premium (MIP) higher, in a gradual process.  FHA says it will increase the monthly MIP to an annual rate of @1.5%.

This will affect the “affordability factor” of purchasing for buyers. Currently, a FHA mortgage of $290,000 has a monthly MIP payment of $132.91.  When the MIP is increased to the full 1.5%, that same $290,000 loan will have a monthly MIP charge of $362.50.

If the full Congress approves the annual increase, FHA will then shift some of the upfront premium to an annual premium to reduce the burden on borrowers at closing.

Either way – the cost of borrowing from FHA is going to be more expensive over time – and borrowers will be looking for property that is $30,000 to $40,000 LESS than the properties they are purchasing now. That’s important to remember for those of us working with First Time Home Buyers!

The GOOD NEWS is that it looks like the provision to force FHA downpayments from 3.5% to 5% was dropped. We’ll continue to monitor this.

If you are considering a mortgage loan in North Carolina, and you want more details on FHA  Mortgage Loan Guidelines – please call Steve and Eleanor Thorne, FHA Mortgage Loan Specialists!  We have over 20 years of experience providing homebuyers with the BEST mortgage rates available!

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FHA PMI update October 2008

October 20, 2008 By 2 Comments

For the most CURRENT FHA MIP -  PMI information as of April 2012 click here

THIS IS INFORMATION ABOUT MIP THAT WAS CHARGED IN 10/2008.  We have it here in the event someone needs to understand how the MIP worked for their mortgage loan taken out in 2008.

This is an update to an earlier post reagarding FHA’s version of Mortgage Insurance (which is sometimes referred to as PMI).

As we mentioned, FHA mortgages have a one-time mortgage insurance premium, known as upfront mortgage insurance. The cost of this insurance has bounced around alot this year – and is NOW 2.25% of the loan.

This upfront fee is non-refundable.  There’s also a monthly fee that’s based upon several things, but will generally run .55% of the loan amount.  If you live in the property for more than 5 years, and you have a 20% equity gap – the monthly amount can be dropped just like with it’s conventional counter part – PMI.

The program is similar to the USDA and VA programs.  Both of those loan programs have a type of mortgage insurance (called a Guarantee Fee), that’s non refundable.  The biggest difference is that FHA also has a monthly fee collected.

The common belief that the monthly mortgage insurance on a FHA loan is very expensive is wrong.  Unlike a Conventional Loan, no matter how much you put down, it’s either .55 percent of your base loan amount. When you compare this program to a Conventional Loan Program that requires PMI, you would need to put down at least 10% down in order to get to .52 percent.

These PMI amounts are accurate for Condos, 203k loans – or regular 203b FHA loans.

For more info – call Steve Thorne, Cary Mortgage Loans, 919-649-5058 – FHA Mortgage Loan Specialist!

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New FHA Insurance Premiums

August 28, 2008 By Leave a Comment

THIS POST IS DATE SPECIFIC… note that FHA has changed it’s MIP charges 7 times between 2008 and 2012. CURRENT FHA PMI RATE INFORMATION

We are leaving this time sensitive data up as a point of reference for people who purchase during that time.  Depending on when you closed, the amount of your refund could be different!  For specific questions, please contact us at 919-649-5058

 

August, 2008

Several months ago I shared with you the “newest” Risk Based Pricing for FHA Mortgage Insurance (MIP).  Well… that’s changed, again.

With the new Housing Bill, Congress “outlawed” the Risk Based Pricing Model FHA had in place… so now FHA has a NEW PLAN for MIP!  Effective October 1, 2008 the MIP will be calculated at this model:

Upfront premium

Ø     Purchases and credit qualifying refinances:   1.75% upfront.

Ø      Streamline refinances:  1.5% upfront

With respect to the upfront premium, there are no differences for mortgage term or LTV.

Annual Premium

Purchases, Credit qualifying and Streamline Refinances

1.      Greater than 15 year term mortgages

Loan-to-value (LTV) ratio                              Annual premium

Greater than 95%                                         .55

Less than or equal to 95%:                           .50

2.      15 year or less term mortgages

Greater than 90% LTV                                   .25

Less than or equal to 90%                           None

If you are considering a purchase in the Raleigh or Cary area, or need to be pre-qualified for a mortgage loan, please call Steve and Eleanor Thorne,  919-649-5058 Connect With Us on Facebook

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Risk Based Pricing?

June 4, 2008 By 5 Comments

fha mip

This information is about FHA PMI in June of 2008.  This program has changed 8 times from 2008 to 2012.  Current FHA PMI rates

You are buying a home this summer and you are LOVIN’ Life!  Yippee!

Well, if you have credit scores over 640 – there’s more good news!  Effective July 14 FHA will move to Risk Based MIP and your cost of home ownership will be less!  What is Risk Based MIP?  Well, it’s really just the FHA PMI.  FHA insures mortgage loans, they don’t really “Make” loans – so this is their new Insurance Pricing.

So, what does Risk Based MIP mean and what happens if your score is NOT a 640?

Risk Based MIP means that if you are considered a lower “risk”, because your credit score is 580 (for example) then you will have a higher UFMIP.  What is UFMIP??  It’s the UpFront Mortgage Insurance Premium charged on an FHA loan, and there’s a monthly fee too.

This is going up to 2.0%… meaning that if you borrow $100,000 on an FHA loan – you will also be charged $2000 in MIP.  This mortgage insurance is ADDED to your loan – so your Principal and Interest payments are now based on $102,000 (base loan of $100,000 plus MIP of $2,000).  If you sell the home or refinance in the first 7 to 10 years then a portion of the MIP is refunded back to you.

The most significant part of this change is NOT that the UFMIP is going up… the most significant part is that FHA is going to these steps which many see as the first in moving FHA into the “new” sub prime role.  The Risk Based Matrix actually accept scores down to 525 (and lower)… although we don’t know of “Investors” who are willing to purchase loans at these low credit scores.  FHA does not make loans – they only insure them.

So even though their matrix says you can have a lower score and get a FHA loan – it doesn’t mean that SunTrust (for instance) has to make loans at the lower score.  Our best bet is that it will be at least 12 months before loans for people with credit scores under 580 are made.

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How do FHA Loans Work?

March 10, 2008 By 2 Comments

fha loansThe Federal Housing Administration (FHA) has several programs to help folks with homeownership.  An FHA loan is a loan insured against default by the government.  Because of this guarantee, lenders in this day and time are more interested in making FHA loans than ever!

FHA loans are not for everybody.  However, they are great loans for the right people.  FHA charges borrowers an upfront mortgage insurance premium (MIP), which works just like PMI.  Meaning that the “insurance” is really an insurance to the bank, in the event that you don’t make your payments.

The insurance rate is set by FHA, and is determined at the time you apply.  This upfront premium does not need to be paid in cash, and is normally added to your loan amount. Meaning that if your BASE loan is $100,000 and your upfront insurance premium is 1.75%, then your TOTAL loan (what your payments are based on) is $101,750.

They also charge a MONTHLY insurance fee, which is sometimes called “Annual” mortgage insurance.  You take the monthly fee and divide it by 12 to determine the monthly charge – like upfront  MIP, the monthly charge is determined at the time you apply (because FHA has changed these rates 9 times in the past 3 years).

For more information on FHA’s version of PMI, or, to find out if you qualify for a FHA Loan in Raleigh, please call Steve and Eleanor Thorne, Best Mortgage Rates in Cary NC, 919-649-5058

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