Five weeks remaining before FHA mortgage insurance premiums increase

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HUD has scheduled another increase to FHA annual mortgage insurance premiums effective with new case numbers obtained April 1, 2013 and later. FHA’a annual mortgage insurance premiums are paid monthly and are set to rise by 10 basis points.

For example, a base loan amount of $400,000 with a loan to value of 95% or lower, currently has a monthly mortgage insurance premium of $396.65 based on a rate of 1.20%. After the new mortgage insurance rates go into effect, this monthly premium will be $429.71 – an increase of $33.06 per month.

NOTE: Home owners who currently have FHA insured mortgages for their primary or investment properties and who had those mortgages guaranteed by FHA prior to June 1, 2009 will still qualify for reduced mortgage insurance premiums with FHA streamlined refinances. If you’re not one of these lucky home owners, you may want to take action now!

In addition, with new FHA loans as of June 3, 2013, FHA mortgage insurance will remain on the life of the loan. The only way to terminate it is to refinance out of an FHA loan or pay the loan off. Currently, FHA annual mortgage insurance is set to drop off the loan after it reaches a 78% loan to value and a minimum of 60 mortgage payments have been made. However with a minimum down payment scenario, it often takes closer to nine years before the loan to value reaches 78%. I would bet that many Washington home owners either refinance or sell their homes before their mortgage insurance drops off. Regardless, if you want to avoid having to pay FHA mortgage insurance for the life of that FHA insured mortgage, you’ll need to have your FHA case number prior to June 3, 2013.

What can you do?

If you want to avoid having a higher mortgage payment and you’re considering an FHA loan for your refinance or home purchase, you have a short window of opportunity to secure your lower payment now. An FHA Case number is not your application date. It is actually obtained shortly after you have a bona fide transaction and application. As we near the April 1 date, if you have a new FHA mortgage in process, you will want to confirm with your mortgage professional that your FHA case number has been secured. (They can provide you your FHA case number as proof).

I have been helping people with FHA insured mortgages since April 2000 at Mortgage Master Service Corporation. If you would like me to provide you with a rate quote for your home located anywhere in Washington State, click here.

Comments

  1. my brother has a confirmed loan for 85000.00,
    payment was supposed to be 400.00+ a month
    when he recieved his documents the payment
    was over 800.00 amonth the lender said it
    was because of the morgage insurance,it is a
    FHA loan. if this is correct how can anyone
    afford a loan? regards and thank you.

    • Hi Norman,
      The loan officer should have disclosed the payment with the good faith estimate – which would include principal, interest and mortgage insurance – but not property taxes or home owners insurance (HUD’s 2010 GFE is flawed and in the process of being revamped). I’m wondering if that’s what happened or if the lender missed the mortgage insurance? Without seeing a breakdown of his payment, it’s hard to say.

      FHA annual mortgage insurance is not cheap. Assuming your brother’s annual rate is at the current highest possible amount of 1.35%, the monthly amount due for the FHA mortgage insurance is about $96 (85000 x 1.35% = 1,147.50 divided by 12 months = $95.63). This is why I’m thinking the difference is the taxes/insurance and not the mortgage insurance?

      I use a rate quote form that fills in the blanks where HUD’s GFE has failed so that borrowers know what their total payment will be.

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