Get Your Applications In : Bay Area FHA Mortgage Update

Get Your Applications In : Bay Area FHA Mortgage Update

FHA Mortgage Insurance Changes

After this week ends, the FHA is raising mortgage insurance premiums on its new Pleasanton borrowers. It’s the FHA’s third such increase in the last 12 months.

Beginning with FHA Case Numbers assigned April 18, 2011, monthly mortgage insurance premiums will be higher by 25 basis points per year, or 0.25%.

Cost of the increase

First time home buyers take note, against a $200,000 loan size, the MIP increase adds $500 to an FHA-insured borrower’s annual cost of homeownership. All new FHA loans are subject to the increase — purchases and refinances.

Existing FHA-insured homeowners across California are unaffected. Premiums do not rise for loans already made.

The FHA is increasing its mortgage insurance rates because, as a group, the FHA is insuring a much larger percentage of first time home buyer loans across the U.S. housing market.

FHA Market Share

In 2006, the FHA held a 4 percent market share. By 2010, that share ballooned to 19 percent and, today, it’s estimated to be even higher.

In its official statement, the FHA says that the quarter-point MIP bump will “significantly strengthen” its reserves which are depleted because of delinquencies and defaults. By law, the FHA’s capital reserves must meet certain levels.

Therefore, to meet these requirements, the FHA is rolling out its new mortgage insurance premium schedule:

  • 15-year loan term, loan-to-value > 90% : 0.50% MIP per year
  • 15-year loan term, loan-to-value <= 90% : 0.25% MIP per year
  • 30-year loan term, loan-to-value > 95% : 1.15% MIP per year
  • 30-year loan term, loan-to-value <= 95% : 1.10% MIP per year

In order to calculate what your FHA monthly mortgage insurance premium would be, multiply your beginning loan size by your insurance premium in the chart above, then divide by 12.

The FHA also charges a 1 percent, up-front mortgage insurance premium at closing. That figure remains unchanged.

Purchasing Real Estate in the Bay Area can often leave you with many questions. As a Loan Officer at Vintage Mortgage Group in Pleasanton I will sit with you and plan out which financing option best meets your needs. Send me a message below and we can set up a time to go over your options. As always please subscribe below to receive mortgage updates directly to your email.

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