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!
If you have an existing loan that still has PMI, will the changes affect the montly mortgage on the exixting loan?
Thanks,
John KCMO
No – once you have your mortgage insurance in place, it will not change for FHA loans. All changes will only affect those going forward.