Bay Area Home Cost Increase: FHA Mortgage Insurance Increasing April 9, 2012

Bay Area Home Cost Increase: FHA Mortgage Insurance Increasing April 9, 2012

Planning to use an FHA-backed mortgage for your next home loan? Conventional loan options may be a better fit going forward.

Beginning Monday, the Federal Housing Administration (FHA) is changing the way it charges mortgage insurance to U.S. homeowners. For the fourth time since 2010, FHA mortgage insurance premiums are rising for all FHA-backed homeowners.

Planed FHA Changes

For FHA Case Numbers assigned on, or after, Monday, April 9, 2012, there are two planned changes.

First, FHA Upfront Mortgage Insurance Premiums (UFMIP) will increase by 75 basis points to 1.75%, or $1,750 per $100,000 borrowed. Upfront Mortgage Insurance Premium is paid at closing, and typically added to an FHA borrower’s loan size.

The current UFMIP rate is 1.000 percent.

Second, annual FHA mortgage insurance premiums are rising. All new FHA-backed loans will be subject to a 10 basis point increase in annual mortgage insurance premiums, costing homeowners an extra $100 per $100,000 borrowed per year. For a Pleasanton homeowner borrowing $300,000 on an FHA-backed loan, the upfront mortgage insurance cost will rise to $5,250 from $3,000 — a 75% increase.

15-year FHA fixed rate mortgages with loan-to-values of 78% or less remain exempt from annual mortgage insurance.

The new FHA annual mortgage insurance premium schedule follows :

  • 15-year loan term, loan-to-value > 90% : 0.60% MIP per year
  • 15-year loan term, loan-to-value <= 90% : 0.35% MIP per year
  • 15-year loan term, loan-to-value <= 78% : 0.00% MIP per year
  • 30-year loan term, loan-to-value > 95% : 1.25% MIP per year
  • 30-year loan term, loan-to-value <= 95% : 1.20% MIP per year

In addition, for loans above $625,500, beginning with FHA Case Numbers assigned on, or after, June 11, 2012, there will be an additional 25 basis point increase in annual MIP.

To calculate your monthly MIP obligation as a FHA homeowners, multiply your starting loan size by your insurance rate from the list above, then divide by 12.

The important part of the new FHA mortgage insurance rates is that they only apply to new loans registered on, or after, April 9, 2012. Loans registered prior to April 9, 2012 — including loans already in-process and/or funded — are 100% exempt from the changes.

The key word is “register”.

To register an FHA loan simply means to have an FHA Case Number assigned to it. You don’t have to lock a mortgage rate and you don’t even have to choose a particular lender to work with. You just need an FHA Case Number and to get that, you just need a name, social security number, property address and a few other small details.

In other words, you can lock in to the old FHA mortgage insurance premium schedule without actually locking in to an FHA mortgage rate itself. All you need is an FHA Case Number

Once your FHA Case Number is assigned, you’re locked in to today’s lower premiums.

I’m Here to Help You With Your Purchase or Refinance

I love to work with readers that find my information on the Mortgage and Housing Market helpful in your decision making process. As a Mortgage Planner at Vintage Mortgage Group FHA loans are just one option in Pleasanton I am in a unique position to help you capitalize on historically low interest rates in 2012. Contact me below today to help you with your purchase or refinance.

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