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FHA Mortgage Insurance increasing

zamiller1110
New Contributor

FHA Mortgage Insurance increasing

I just got the following e-mail: 

 

The Federal Housing Association (FHA) has announced 2 increases that will be applied to all new FHA loans on April 9th, 2012.

  1. The Upfront Mortgage Insurance Premium (UFMIP) will be increased from the current 1.00% to 1.75% effective April 9th. (which really only gives us until the first few days of April to get everything locked and in place to beat the deadline.) This is based on the loan amount, so it is a substantial increase.
  2. Monthly Mortgage Insurance will also be increased by .10% as part of the Payroll Tax Act. While this is not a huge increase, it will still increase your costs.

 

Question about Mortgage Insurance: Is this something that is paid upfront in closing costs? Or is it paid monthly throughout the lifetime of your mortgage?

 

Message 1 of 15
14 REPLIES 14
StartingOver10
Moderator Emerita

Re: FHA Mortgage Insurance increasing


@zamiller1110 wrote:

I just got the following e-mail: 

 

The Federal Housing Association (FHA) has announced 2 increases that will be applied to all new FHA loans on April 9th, 2012.

  1. The Upfront Mortgage Insurance Premium (UFMIP) will be increased from the current 1.00% to 1.75% effective April 9th. (which really only gives us until the first few days of April to get everything locked and in place to beat the deadline.) This is based on the loan amount, so it is a substantial increase.
  2. Monthly Mortgage Insurance will also be increased by .10% as part of the Payroll Tax Act. While this is not a huge increase, it will still increase your costs.

 

Question about Mortgage Insurance: Is this something that is paid upfront in closing costs? Or is it paid monthly throughout the lifetime of your mortgage?

 


FHA has two methods of charging for Mortgage Insurance. Both of them are mandatory.

 

1) the UFMIP is paid up front. It is actually rolled into your loan amount. This is the amount you stated above 1.75% of the loan value beginning April 2012.

2) the monthly portion (now to be 1.25% of your financed amount) is collected monthly until your principal balance reaches a LTV of 78%, then it stops. You will need to notify your lender in writing anyway so they stop charging you. 

 

You can reduce the monthly PMI charged by FHA by putting down 5% rather than 3.5% as your down payment. If you choose to do that, your MIP fee will be 1.20% rather than 1.25%.

Message 2 of 15
boomhower
Valued Contributor

Re: FHA Mortgage Insurance increasing

FHA defaults must have went way up as they are tightening things up considerably.  Between the increased insurance costs and requiring collections to be paid the cost of entry to get into FHA has gone up a lot.  But if it's what it takes to keep the program solvent it's worth it in the long run.  If all we had was conventional as an alternative it would be a lot worse.

Message 3 of 15
FICOisa4letterword
New Contributor

Re: FHA Mortgage Insurance increasing

I don't mean to be dense, but when you say the upfront MIP is paid upfront, but rolled into the loan, I get confused. Is it due at closing as one lump sum, or is it also rolled into the loan and broken up into monthly payments? Do I need cash in hand at closing to pay for mortgage insurance?

Message 4 of 15
Walt_K
Senior Contributor

Re: FHA Mortgage Insurance increasing


@FICOisa4letterword wrote:

I don't mean to be dense, but when you say the upfront MIP is paid upfront, but rolled into the loan, I get confused. Is it due at closing as one lump sum, or is it also rolled into the loan and broken up into monthly payments? Do I need cash in hand at closing to pay for mortgage insurance?



You can do either.  You can either pay it in cash upfront, or you can roll it into your loan. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 5 of 15
FICOisa4letterword
New Contributor

Re: FHA Mortgage Insurance increasing

Walt_K: Great! Thanks.
Message 6 of 15
Walt_K
Senior Contributor

Re: FHA Mortgage Insurance increasing


@FICOisa4letterword wrote:
Walt_K: Great! Thanks.

No problem.  With how low rates are, it often makes sense to roll it into the loan especially if you are cash strapped.  You're talking about a very small difference in your monthly payment.  One reason it can make sense to pay upfront is if you are getting too much back in credits.  We were fortunate to get credits that were exceeding our closing costs.  Because the downpayment has to come from your funds, we elected to pay the upfront MIP in cash so that we weren't leaving money on the table.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 7 of 15
FICOisa4letterword
New Contributor

Re: FHA Mortgage Insurance increasing

That's definitely our situation - we are anxious to buy this summer before our daughter starts school, but cash in hand is an issue. Based on income and our DTI ratio, we will qualify for and plan to use the max $271k in our area. We are budgeting appx. $10,000 down to get to the 3.5%, which makes our price point about $281k or less. We are hoping to find a seller willing to pay closing costs and hoping to roll MIP into the loan. In case it doesn't work out as we'd like, we can cough up another 2-3k, but that's about it, as I have a 6-year old CO to Chase (formerly Providian) and 2 Medical Collections for $250 ea. that are 3 years old that I am sure I will have to pay off at closing. Now just hoping we make it across the midscore finish line! Waiting on a couple more credit cards to report as $0 balance after recent payoff and waiting for some almost 2 year old inquiries to drop as well.

 

Me: 3/27/2012  EQ FICO: 627, EXP FAKO: 654, TU FICO: 677

DH: 3/27/2012 EXP FAKO: 604, EQ FICO: 628, TU FICO: 703

Message 8 of 15
Walt_K
Senior Contributor

Re: FHA Mortgage Insurance increasing


@FICOisa4letterword wrote:

That's definitely our situation - we are anxious to buy this summer before our daughter starts school, but cash in hand is an issue. Based on income and our DTI ratio, we will qualify for and plan to use the max $271k in our area. We are budgeting appx. $10,000 down to get to the 3.5%, which makes our price point about $281k or less. We are hoping to find a seller willing to pay closing costs and hoping to roll MIP into the loan. In case it doesn't work out as we'd like, we can cough up another 2-3k, but that's about it, as I have a 6-year old CO to Chase (formerly Providian) and 2 Medical Collections for $250 ea. that are 3 years old that I am sure I will have to pay off at closing. Now just hoping we make it across the midscore finish line! Waiting on a couple more credit cards to report as $0 balance after recent payoff and waiting for some almost 2 year old inquiries to drop as well.

 

Me: 3/27/2012  EQ FICO: 627, EXP FAKO: 654, TU FICO: 677

DH: 3/27/2012 EXP FAKO: 604, EQ FICO: 628, TU FICO: 703


FYI, while inquiries stay on your report for two years, FICO only scores them for the first year.  Your score won't change when those inquiries drop.  But the improvement in utilization from paying off your CCs should help.  Good luck.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 9 of 15
wally101
Valued Member

Re: FHA Mortgage Insurance increasing

So... I have been pre approved for 199K FHA loan. My Approximate Loan Cost Ilustration has my FHA Upfront MIP at $1920.65 so that will go to $3361.13 and Mortgage Insurance goes from $182.53 to $200.78??? Bummer!!!

EQ FICO score from here... EQ 716
USAA monitoring Experian Plus scores : EX 773 EQ 773 TU 785
Message 10 of 15
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