FHA PMI Could Go UP January 2013

FHA is running into more Budget issues…  According to an independent audit just released, they are running in the hole some 16.3 BILLION dollars as of the end of September.   The last 5 times that’s happened, FHA PMI rates have gone up!

The House has already passed the FHA Fiscal Solvency Act of 2012, and while it has not passed the Senate – it would raise the FHA PMI Rates in January from 1.25% to 2.05%.

DOES THAT MEAN FHA PMI RATES ARE GOING UP?

Maybe.  Actually… Certainly.  FHA Announced in it’s report to Congress about it’s PMI “issues” that it intends to increase rates by at least  .10% at some yet undisclosed date in 2013.

The Question: FHA PMI Rates 2013 / HOW MUCH Will FHA PMI Rates Go Up in 2013

FHA itself doesn’t actually make home loans, they just insure them  – and set the underwriting guidelines on what they will insure (and what those rates will be). The purpose of the House Bill is to protect the FHA’s mortgage insurance fund.

FHA is responsible for maintaining a balanced budget- so raising the FHA PMI rates (they call it Mortgage Insurance Premium or MIP rates)  could help shore up reserves.  The long term hope is that “private” investors will magically step up and start lending for homes again, freeing the QE dollars for other projects.

There are two FHA PMI fees that a borrower must pay.  An Up-Front FHA PMI charge that  is typically financed into the loan and an Annual FHA PMI fee – which is really NOT paid annually – we break that charge up into 12 monthly payments.

1.25% Versus 2.05%

Assuming WORST CASE and Congress forces FHA to raise rates so that it’s solvent, then FHA PMI rates will go to 2.05% – what does that mean for the average homebuyer in NC?

Here’s an Example on a home with a purchase price of $300,000 with the CURRENT FHA PMI rates:

• 3.5% down payment = A base loan amount of $289,500
• 1.75% Up Front FHA PMI charge financed into loan = financed loan amount of $294,566.
• Current FHA PMI “Annual Fee”  is 1.25% of financed loan amount which = $3,682
• Divided by 12 monthly payments = $306.84 per month for FHA PMI.

and if the changes are implemented…

• 3.5% down payment = A base loan amount of $289,500
• 1.75% Upfront FHA PMI Fees financed into loan = financed loan amount $294,566.
• The new FHA PMI “Annual fee” of 2.05% of financed loan amount which = $6,038.61
• Divided by 12 monthly payments = $503.22 per month for Mortgage Insurance.