Effective this week, FHA annual mortgage insurance premiums were once again increased on loans with case numbers issued April 1, 2013 or later by 10 to 15 basis points. This is just the first round of changes that were issued with HUD Mortgage Letter 2013-04.
Round 2 of changes takes place on June 3, 2013.
FHA mortgage insurance will remain with the term of the loan effective with case numbers issued June 3, 2013 or later. You have until May 31, 2013 to get your FHA case number and have FHA mortgage insurance that will automatically drop off your mortgage payment after 60 payments AND your loan to value based on the original terms reaches 78%.
Quite frankly, most borrowers with FHA loans retain the mortgage insurance until they refinance or sell the home. If a home buyer is only doing a 3 to 5% down payment, it’s going to take ten years or more for the loan to value to reach 78% unless the home owner is making additional payments towards principal.
Increase to annual mortgage insurance premiums on 15 year fixed FHA loans with loan to values 78% or lower. Through May 31, 2013, FHA 15 year fixed mortgages with 78% LTVs or lower do not have annual mortgage premiums. Effective with case numbers issued June 3, 2013 and later, 15 year fixed FHA mortgages will go from zero annual mortgage insurance to paying 45 basis points.
Exceptions to the this next round of changes taking place on June 3, 2013 are:
FHA streamlined refinances where the existing FHA loan was endorsed by HUD prior to June 1, 2009. These refinances will still qualify for reduced mortgage insurance premiums.
FHA Reverse Mortgages aka HECM (Home Equity Conversion Mortgages).
Bottom line: You have just shy of two months to get your FHA loan case number and not have these changes go into effect.
With the increase to FHA mortgage insurance premiums, it’s worth comparing conventional mortgages with private mortgage insurance for borrowers with strong credit, income and employment history assuming loan to values work.
If you are interested in an FHA or any mortgage for homes located in Washington state, I’m happy to help you! Click here for a mortgage rate quote.