Friday, January 22, 2010

FHA Mortgage Insurance Premium to be Raised

The FHA will soon raise the UFMIP (Up Front Mortgage Insurance Premium) that they charge on all mortgages.

On any new FHA mortgages after April 5th, the UFMIP will now be 2.25% of the loan amount, as opposed to the current 1.75%.

Currently a $300,000 purchase with standard 3.5% down payment would have a $289,500 Base loan amount. The mortgage insurance would be $5,066 (1.75% UFMIP). So that makes the Total loan amount $294,566. At 5.00% that would be $1,581 for Principal and Interest.

Same purchase price after April 5th.

$300,000 purchase with 3.5% down payment would have the same base loan amount of $289,500. The mortgage insurance would go up to $6,513 (2.25% UFMIP). The Total Loan Amount is $296,013. At 5.00% that would be $1,589 for Principal and Interest.

As you can see this change will affect the overall balance of the mortgage, however it should not have a large impact on the monthly payment.

Here is how the change will work time-wise if a homebuyer wants to avoid the increase:

Homebuyers will need to have an FHA CASE number prior to 4/5/10. They will not have to close before that date. So for example, your client puts a property under agreement 3/25/10. They contact their mortgage person to immediately to start the application process and obtain an FHA case number. The buyer will be grandfathered in under the old calculation as long as they obtained their FHA case number prior to 4/5/10. The FHA Case Number is tied to the property as well as the client – so clients who have not identified or put a property under agreement by 4/5 will be subject to the new calculation.

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