FHA-insured mortgages are about to get more expensive.
Starting in April, the Federal Housing Administration is increasing the upfront and annual mortgage insurance premiums for FHA-insured loans. From a recent FHA press release:
As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent.
In case you’re not familiar with FHA financing, two types of mortgage insurance are required on the majority of FHA-insured loans:
- Upfront mortgage insurance, or UFMIP, which is paid once at loan closing. FHA allows this premium to be financed into the loan.
- Mortgage insurance premium, or MIP, which is paid in equal installments are part of your mortgage payment.
To see how the rate changes will impact the cost of an FHA loan, let’s assume a home buyer is putting down 3.5% on a new home and taking out a $200,000 FHA-insured loan. The UFMIP premium will increase from the current rate of 1% of the loan amount, or $2,000, to 1.75% of the loan amount, or $3,500. The MIP will increase from 1.15% of the loan amount to 1.25%, which increases the monthly MIP payment from $191.66 to $208.66.
If you’re in the market to get an FHA loan, I highly recommend getting the ball rolling as soon as possible. You don’t need to have your loan closed before April to take advantage of the current mortgage insurance rates, your lender just needs to have your FHA case number before April 9, when the first premium change takes effect. If you don’t know what an FHA case number is, don’t worry about it, just make sure your lender has it before April 9.
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