Beginning Monday, June 11, the FHA is changing its mortgage insurance premium schedule for the second time this year.
Some FHA mortgage applicants will pay lower mortgage insurance premiums going forward. Others will pay more. The new premiums apply to all FHA mortgages, both purchase and refinance.
The MIP update will be the 5th time in four years that the FHA has changed its mortgage insurance premium schedule.
FHA-backed homeowners who have not refinanced within the last 3 years will benefit from the new MIP. This is because, beginning with all FHA Case Numbers assigned on, or after, June 11, 2012, homeowners whose current FHA mortgage pre-dates June 1, 2009 will be entitled to dramatically reduced annual mortgage insurance premiums and almost zero upfront MIP via the FHA Streamline Refinance program.
Whereas new FHA applicants may pay up to 1.25% per year for annual mortgage insurance plus 175 basis points at closing for upfront MIP, the "grandfathered" FHA applicants will pay just 0.55% per year for mortgage insurance and 1 basis point at closing.
Assuming an FHA loan size of $200,000, the savings are large :
- New FHA applicant : $208 per month for annual MIP; $3,500 due at closing for upfront MIP.
- Pre-June 2009 FHA applicant : $92 per month for annual MIP; $20 due at closing for upfront MIP.
The premiums apply to all FHA mortgage applicants, regardless of loan product or term. For example, 15-year FHA mortgage will follow the same mortgage insurance premium schedule as a 30-year FHA mortgages.
Another class of FHA-backed homeowners won't get so lucky. For homeowners in high-cost areas whose mortgages are between $625,500 and the local FHA loan limit, annual mortgage insurance premiums will be raised by 0.25% for all 15-year and 30-year loan terms.
For loan sizes above $625,500, the new annual FHA mortgage insurance premiums are as follows :
- Loan term of 15 years or fewer, loan-to-value of 90% or less : 0.35% per year
- Loan term of 15 years or fewer, loan-to-value greater than 90% : 0.60% per year
- Loan term of more than 15 years, loan-to-value of 95% or less : 1.45% per year
- Loan term of more than 15 years, loan-to-value greater than 95% : 1.50% per year
FHA-backed homeowners with loan terms of 15 years or fewer, and with loan-to-values below 78%, are exempt from annual MIP. Upfront MIP payments, however, remain mandatory.
The FHA continues to tinker with its mortgage insurance premiums, attempting to strike a balance between affordability for its homeowners and solvency for its program. Experts expect the FHA to change its premiums again. And, when it does, it's likely that premiums will rise.
If your FHA mortgage will be for more than $625,000, and you plan to make a purchase or refinance application soon, it's best to get your FHA Case Number prior to Monday, June 11. Otherwise, you'll pay higher annual MIP.
Against a $700,000 mortgage, the extra 0.25% in MIP per year will add $1,750 to your annual housing payment.