FHA is once again increasing mortgage insurance premiums (MIP) on all new purchase and refinance transactions. Effective for FHA loans that have been assigned on or after June 3, 2013 and in addition to this increase, the Annual Mortgage Insurance Premium will remain for the life of the loan. Meaning, you can only remove the mortgage insurance by refinancing out of the mortgage or selling the home.
FHA had just increased all its rates just over a year ago to 120 basis points (1.2% of the loan amount) of the loan amount and now it will be as high as 155 basis points. On a $100,000 loan amount, the old mortgage insurance payment would have been $100 per month; the new Mortgage Insurance payment will be $129.17. Considering just 2 years ago, the mortgage insurance premium on all FHA loans was 55 basis points (just over a half percent) and that payment on $100,000 would come to $45.83.
So even though mortgage rates have come down over the last 2 years, this increase in Mortgage Insurance has caused the cost of this loan to increase dramatically. Also with this additional cost, you can no longer have the mortgage insurance just drop off once you gain 20% of equity in the home.
Now, these may not seem like big increases to you, but for someone borrowing $400,000; this would have the Mortgage Insurance going from $183.33 to $516.67. Imagine…paying $516.67 for mortgage insurance!!
Now is the best time to get pre-approved by a qualified Loan Officer to give you several choices of mortgage programs. It is not always wise to chase to the lowest rate available without truly understanding the overall mortgage program.
Call me to find out about low down payment loans, as low as 3% with-out any mortgage insurance at all.
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