Lower and Higher Mortgage Insurance Premiums on FHA Loans Begin Oct 4, 2010

Posted: August 18, 2010 in Uncategorized

Again this year, FHA is modifying its mortgage insurance.  This will affect any FHA case number that is issued on or after October 4, 2010 and will affect the upfront and annual mortgage insurance premium.

With the new structure, assuming a 30 year fixed rate with 5% down, the Upfront Mortgage Insurance Premium (MIP) drops to 1% of the amount borrowed from 2.25%.  The annual MIP is increased to .85% from .50% of the amount borrowed.  This will decrease the upfront cost to own a home but it will increase the long term costs.

Using a $150,000 mortgage as an example, Upfront MIP falls to $1500 from $3375.  The monthly mortgage insurance will rise to $106.25 per month from $62.50 per month.  The FHA expects this to raise an additional $300 million in premiums monthly.

For the majority of FHA home buyers, this change may be seen as good or bad.  Loans will cost less to procure but will be more costly per month.

If you would like to talk specifically about the benefits of procuring a FHA mortgage before the change takes place, please email me at Chuck.Walden@prospectmtg.com

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