THE FHA PMI Mortgage Rates referred to in this post is OUTDATED.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!