New FHA rules

[jadeite788]

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@JM-AM wrote:

The New Rule will also raise the cost of how much you pay for MIP, which will start before June 1, 2013.

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My LO told me it starts April 15th and it goes to 1.35% on the life of the loan if putting down less than 10%.  She told me currently the MIP is 1.25%

[cclee]

Does this only affect 30yr loans?  I don't see any mention of 15yr loans.

[jadeite788]

Life of the loan means regardless if its 30 or 15 year.

[Mickey11]

Wow 10% now otherwise PMI stays on there for the life of the loan? That really sucks!

[FLAJenn]

So if you do at least 10% you can still drop the PMI eventually?

[Mike_B03]

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@FLAJenn wrote:

So if you do at least 10% you can still drop the PMI eventually?

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Yes but they changed it from 5 years to either 10 or 15, I forgot exactly which one but I know for sure it's been upped to more years.

Of course you can always refinance out of an FHA loan into conventional at any time.

[MovingForward_2012]

+1, you would have to refinance to eliminate the PMI. We just closed on an FHA loan on 2/6 under the old rules thank goodness!

[JM-AM]

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@Mike_B03 wrote:

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@FLAJenn wrote:

So if you do at least 10% you can still drop the PMI eventually?

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Yes but they changed it from 5 years to either 10 or 15, I forgot exactly which one but I know for sure it's been upped to more years.

Of course you can always refinance out of an FHA loan into conventional at any time.

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I do agree, just have to compare apples to apples at the time of refinance.

For example, if rates increase to lets say 5% by time you are ready to refinance, would it be worth it?

The rate I used is hyperthetical, but in that example if you are paying 3.5% and your PMI is $150 month and gets lower as prinple balance is lowered, would refinancing be whats in your best interest? Your payment would probably be the same and possibly higher, your loan term may have increased back to your original terms. So what are you actually saving?

Anytime you refinance you really need to do a full analysis of the situation.

[MovingForward_2012]

But with the new FHA rules, does the PMI still reduce over time as the principal is lowered? But instead of being cancelled at 78%, it ends at 0%, when the house is paid off?

I forgot about the potential for higher interest rates at the time of refinancing.

[JM-AM]

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@MovingForward_2012 wrote:
But with the new FHA rules, does the PMI still reduce over time as the principal is lowered? But instead of being cancelled at 78%, it ends at 0%, when the house is paid off?

I forgot about the potential for higher interest rates at the time of refinancing.

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Yes, your MIP or PMI is only based off the prinicple balance. So yes it decreases. Do not expect major decreases if you are paying your monthly premium as scheduled.

General idea would be to say it drops a dollar to a couple of dollars a month each year that passes. If you pay more into your principle yearly then you may see bigger savings.

Just a quick note and reminder, FHA will collect MIP for a minimum of 5 years.