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My understanding of FHA is that it requires an upfront Mortgage Insurance Premium and thereafter requires an annual MIP. What I am confused about is the rate for both of these MIP payments.
What I have found online suggests that the rate is 1.5% of the total financed value upfront, and then .5% per year thereafter. However, the realator I am currently dealing with (whom I have no reason to trust) keeps telling me that the rate is 2.25% upfront and then 0.65% per year thereafter. When I confront him about the conflicting information I've found online, he acts astonished, but really has no answer. According to him, "these have always been the FHA rates." The loan officer/financial planner that he referred me to was also spouting this same line. They have also told me that the MIP rates for FHA loans are going up after the first year. I believe he said the upfront MIP payment would increase from 2.25% to 3%. I also must mention that they have pulled out several other variations of these numbers during the course of my discussions with them (including 2.5% upfront, .85% per month thereafter, and .67% per month).
Maybe I am not looking in the right place, but I cannot find anything online that confirms what these people are tellling me. The only thing I can find online suggests that the rates for FHA MIP is 1.5% upfront and .5% per year thereafter. Who is right?
After a lot of digging, I found this document on the US Department of Housing and Urban's Development's website. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-16ml.doc. It says that it is currently as of July 14, 2008.
If I am reading that table correctly, then the only people who are paying 2%+ MIP are extremely risky borrowers. I do *NOT* fall into this category. My credit scores from all three beraus are 780 from TransUnion, 779 from Experian and 728 from EquiFax. If my understanding of those rates are correct, then I should only be paying 1.25% upfront and .55% or .50% therafter (depending on whether I put < 5% or > 5% down.
These people know my credit scores (they gave them to me), and they know my financial situation (I can afford to put 5% down...possibly as much as 10%). Where in the heck are their numbers coming from???
Ah crap...now i find this. Looks like it is 1.75% upfront and .5% therafter for almost anyone who qualifies.
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-22ml.doc
No wonder everyone is confused.
1.75% up front and then .5% thereafter is correct. FHA was set to implement a risk (score) based premium where the higher the risk the more you pay by Congress passed a 1 year moratorium on the change because they feared people getting shut out of FHA loans. I believe the moratorium expires in October 2009, at which time the risk based system you found will be accurate. In the meantime FHA raised the the currect rates from 1.5% up front and .5% per year to the now current 1.75% and .5% per year.
And yeah it is confusing.