HUD announced this month that they were raising the Mortgage Insurance Premiums (MIP) effective April 1, 2012. The Upfront MIP is changing from 1% to 1.75% and the Annual MIP is changing from .90% to 1.25%.
Before you panic about this bad news… the bottom line is that on a $100,000 FHA base loan amount, the payment will increase less than $7 per month as a result of both MIP premium increases.
The increase will affect only new loans with FHA Case numbers ordered on or after April 1, 2012. There are two types of Mortgage Insurance on FHA loans:
1) Upfront MIP is calculated by multiplying the loan amount by 1.75% and then adding that amount to the base loan amount. The “Upfront MIP” is financed into the loan.
2) Annual MIP is calculated by multiplying the loan amount by 1.25% and dividing that total by 12 to equal a monthly amount that is paid as part of the homebuyers total monthly mortgage payment.
This is the fourth increase HUD has made to FHA MIP costs in the last 2 years. These increases have been necessary due to the rapid increase in the number of loans that are insured by HUD under the FHA program.
In 2006, FHA insured about 2% of all loans made for purchasing a home in theU.S.In 2011, that percentage jumped to 18% of all loans used to buy a home. As the number of FHA loans have increased, so have the number of foreclosures resulting in the need for HUD to raise more revenue.
All new FHA loans with case numbers ordered on or after April 1, 2012 are subject to the increased MIP amount. The changes will affect both purchase and refinance loans. Existing FHA-insured homeowners will not be affected by the MIP rate change.
If you have any questions, feel free to comment below.
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