1. Monthly Mortgage Insurance Premiums (MIP) are scheduled to increase affective April 1, 2013. While Upfront MIP is remaining the same at 1.75%, Monthly MIP is changing from 1.25% to 1.35%.
2. June 3, 2013 the FHA will no longer allow an FHA borrower to cancel their mortgage insurance premium payments when the loan balance drops to 78% of the property’s value!
This is the fifth increase HUD has made to the FHA MIP cost in the past 3 years. In April of 2012, FHA increased the MIP rates from 1% to 1.75% on the Upfront MIP and from .90% to 1.25% on the Monthly MIP.
The 2013 Monthly MIP increase will affect only new loans with FHA Case numbers ordered on after April 1, 2013. There are two types of Mortgage Insurance on FHA loans:
1. Upfront MIP is calculated by taking 1.75% of the loan amount, and then adding that amount to the base loan amount. The “Upfront MIP” is financed into the loan.
2. The Annual MIP also referred to as “Monthly MIP” is calculated by taking 1.35% of the loan amount, then dividing that total by 12 to equal a monthly amount that is paid as part of the homebuyer’s total monthly mortgage payment.
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 the loans for purchasing homes in the U.S. In 2011, that percentage jumped to 18% of all loans used to buy a home. As the number of FHA loans has increased, so have the number of foreclosures resulting in the need for HUD to raise more revenue.
All new FHA loans with FHA Case #’s ordered on or after April 1, 2013 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 changes.
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