FHA Soon to Increase Insurance Premiums
Federal Housing Administration (FHA) loans will soon become more expensive and more restrictive. If you have clients thinking about buying a home soon, they should be aware of the following changes.
The FHA recently announced that it will increase the annual mortgage insurance premium (MIP) by 0.10% for most new FHA mortgages under $625,500. This annual premium increase — which is broken down into monthly payments — will take effect April 1, 2013.
FHA loans over $625,500 with terms greater than 15 years will increase 0.05%. FHA loans over $625,500 with terms equal to or less than 15 years will increase 0.10%. This premium increase will also take effect April 1, 2013.
The FHA will also require most new FHA borrowers with a loan-to-value (LTV) ratio greater than 90% to continue paying annual premiums for the life of their mortgage loan. For borrowers with an LTV less than or equal to 90%, the mortgage insurance premiums must be paid for 11 years. This change goes into effect June 3, 2013.
This reverses a previous policy implemented in 2001 that cancelled the FHA-required MIP on loans when the outstanding principal balance reached an LTV ratio of 78% of the original principal balance.
The primary reason for these changes is to bolster capital reserves for FHA’s Mutual Mortgage Insurance Fund. Congress has mandated that the fund keep 2% in reserves. The current reserve is negative 1.44%.
The FHA also announced a proposal to raise the minimum down payment requirement on loans over $625,500 from 3.5% to 5%.
This article from Heather Mason Carter with Prospect Mortgage
Please contact Atsu if you are thinking Selling or Buying a home ：310-990-9951
Atsuko Kimoto(Atsu)
CELL PHONE: 310-990-9951 (Call me 9:00am-10:00pm)
I specialize in representing both Sellers and Buyers in all of the greater Los Angeles Area.
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Tags: Coldwell Banker, Federal Housing Administration, FHA, Loan, Loan-to-value ratio, LTV, Mortgage insurance, Mortgage loan
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