NEW FHA Premiums
As the government continues to categorize potential home owners as the “rich” they continue to use government guaranteed loans as a source of additional revenue. So FHA is increasing the Monthly MIP 10 bps. This has the effect of adding about $16/mos to the monthly MI payment on a $200,000 purchase($193,000 loan amount). The increased Mortgage Insurance Premiums will affect all Case Numbers Assigned AFTER April 1, 2013. This means your clients need to get a property under contract prior to that date to save the $16/mos or so.
Although that in itself might not be a make or break for most people the real potential problem is what takes place on case number assigned AFTER June 3, 2013. People not under contract and registered with FHA by that time will be stuck with the monthly MI for the life of the loan, unless they put 10% down, then it’s for 11 years! This is huge, as we are talking about a $216 monthly payment that will no longer drop off with the equity. Although the client could certainly refinance to a conventional mortgage down the road when they get the equity built into their home, the real question will be where rates will be at in 3 – 5 years or 10 or 11!
Although most people don’t stay in their homes for 11 years, especially people just getting their starter home, for those that do chose to stay, or maybe won’t be able to afford to upgrade if rates are substantially higher down the road, this is certainly going to be a big additional cost for them.
So if you are on the fence or thinking about waiting it out a little bit longer, now is the time to act, as home ownership costs will only increase to pay for bad loans FHA has done in the past and the money the government needs to finance our $16 Trillion debt.
Base Loan Amt. LTV Previous MIP New MIP
≤ $625,500 ≤ 95.00% 120 bps 130 bps
≤ $625,500 > 95.00% 125 bps 135 bps