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MIP Increase Coming to FHA Loans in April

April 6, 2011

From Loan Officer Joy James

Do you know the latest about FHA loans? A popular alternative to conventional loans, FHA loans will continue to be a popular option for your customers throughout 2011, but soon they will be more expensive.

Annual MIP to increase April 18.

Although FHA defaults dropped in the first quarter of 2011 when compared to the previous year, the increase in FHA lending has put a strain on the reserve it’s required to maintain.

To shore it up, FHA will again increase the annual mortgage insurance premium (MIP) that’s collected as part of the monthly payment. For all fixed rate loans with case numbers assigned on or after April 18, MIP will increase by .25% across the board, which adds about $30 to a borrower’s payment each month. Current FHA loan customers are unaffected by these changes.

Depending on the term and LTV of the loan, the new insurance premiums will be:

  • 15-year fixed, loan to value more than 90% = 0.50% per year
  • 15-year fixed, loan-to-value less than or equal to 90% = 0.25% per year
  • 30-year fixed, loan-to-value more than 95% = 1.15% per year
  • 30-year fixed, loan-to-value less than or equal to 95% = 1.10% per year

The upfront mortgage insurance premium will remain unchanged at 1% of the loan amount.

Because FHA loans are affected by market conditions, guidelines change often.

In fact, this is the third price change to the MIP in the past year! This is why it’s essential to partner with a lender that is well-versed on current FHA guidelines and informed and prepared for future changes.

Do you have prospective customers who would benefit from getting their FHA case number before April 18? Do you have questions on other FHA products, such as ARMs?  Contact your loan officer, who will answer all of your FHA questions.,

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