THERE IS AN UPDATE TO THIS INFORMATION - Please click here for CURRENT FHA PMI information… We are leaving it here, in case someone received FHA’s PMI before 1/1/2010, and wants to check on that or the refund…

If you are a potential new homebuyer, you are wading into a brand new world – with it’s own language!  One of the first thing you will notice is a reference to Mortgage Insurance and the debate over it’s merits.

FHA refers to default insurance as a Mortgage Insurance Premium or MIP for SHORT!  It is similar to the Conventional PMI – but it’s really quite different.

Current FHA guidelinesfor loans over 15 year terms / Purchases and “Non-Streamline” Refinances are:

• 1.750% Upfront .55 AnnualAnnual MIP will terminate when the LTV reaches 78% either by regular monthly amortization payments or additional prepayments, but not before a minimum of five years of monthly MIP payments are paid, regardless of LTV.
• Example: With a $100000 loan the homeowner has a 1.75% premium added to the loan amount.  So the new loan amount is $101750 and this is what the principal and interest payments are based upon.  (If you move or refinance there’s a prorated amount refunded!)  In addition to this, there’s a monthly amount added of .55.  To calculate this, multiply $101750 by .55. which is $559.63.  This is paid in 12 equal installments, so you add $49.29 to your principal and interest payment.

There are two other items to remember with FHA MIP.  One is that if you are purchasing a condominium – there’s no upfront MIP (only monthly).

THE RULES ARE LIKELY CHANGING for FHA and there could be more risk based premiums.  PMI (the conventional version of mortgage insurance) has already gone to this model.

For more information on FHA loans, contactSteve and Eleanor Thorne, Government loan Experts at Connect With Us on Facebook in Raleigh, NC  919-649-5058.

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