Many home buyers, especially first time buyers, choose to do FHA financing. I think it is a great choice if you want to conserve upfront cash. FHA financing requires you to only put down a 3.5% down payment and rates are similar to conventional financing. A mortgage expert can go over the different types of loans with you and find which one works best for your own personal situation. FHA has recently announced that a monthly mortgage insurance premium increase will come into play on new loans starting on or after April 18th. The article below explains more.
FHA Announces Monthly Mortgage Insurance (MIP) Increase
Feb 15, 2011 (www.mortgageorb.com)
The Federal Housing Administration (FHA) has announced a new premium structure for FHA-insured mortgage loans that increases its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 15- and 30-year loans. The up-front MIP will remain unchanged at 1% and will impact new loans insured by the FHA on or after April 18.
According to the FHA, this premium change enables the agency to increase revenues to preserve the stability of its Mutual Mortgage Insurance fund, which had capital reserves of approximately $3.6 billion at the end of fiscal year 2010. The change is estimated to contribute nearly $3 billion annually to the fund, based on current volume projections.
Furthermore, the FHA estimates that on average, new borrowers will pay approximately $30 more per month.
"After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA's capital reserves and help private capital return to the housing market," says FHA Commissioner David H. Stevens. "This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost-effective mortgage insurance option for borrowers with lower incomes and lower down payments."
Here are the 7 things you need to know about these changes:
These changes are effective April 18th, 2011.
1. The Annual Insurance Premium will increase .25% for standard forward mortgages.
2. The Upfront Mortgage Insurance remains at 1.00%.
3. The Annual Premium is now 1.15% for LTV’s GREATER than 95% on 30 year loans.
4. The Annual Premium is now 1.10% for LTV’s EQUAL to or LESS than 95% on 30 year loans.
5. The Annual Premium is now .50% for LTV’s GREATER than 90% on 15 year loans.
6. The Annual Premium is now .25% for LTV’s EQUAL to or LESS than 90% on 15 year loans.
7. Case numbers with no activity for 6 months will automatically be canceled (includes case numbers pulled prior to April 18th, 2011).
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