Tag Archives: Mortgage Insurance Premiums

Not so fast….FHA Mortgage changes rescinded!

Within hours of President Donald J. Trump being sworn in as President, HUD has rescinded the proposed reduction of Mortgage Insurance Premiums on new FHA loans.  The reduction of Mortgage Insurance Premiums, called MIP on an FHA Loan, was supposed to be reduced by 25 bps per month on new loans at the end of this month.  This would have saved the FHA home loan borrower about $50 per month on a loan of $250,000.

While this is not great news for new FHA home loan seekers, I prefer to look at the re examination of FHA Mortgage Insurance Premium funds and see what can be done to reduce the monthly mortgage payments for FHA home loan seekers.

Possible changes include the life of the loan provision currently on FHA Mortgage Insurance Premiums.  It would be less costly for home owners with a FHA Mortgage if the FHA MIP would drop off automatically in later years.  Currently, for the life of the loan, FHA will collect Mortgage Insurance Premiums.  On a conventional loan with Private Mortgage Insurance, the PMI can be dropped when your equity reaches 20%, or when by normal amortization schedules, you reach the 78% of the original loan to value.

Right now, the only way to drop the FHA Mortgage Insurance Premium is to pay off the loan, most likely with a refinance or sale.

If you are in the Treasure Valley, we have seen massive home appreciation. Someone with a home loan from 2013 or 2014 might have enough equity in 2017 to refinance into a conventional loan without PMI or MIP, and save that money every month.

To see what you can save, contact me here.

 

 

 

What are the new changes to FHA home loans?

As of June 1st this year, major changes were made to the FHA home loan program and its Mortgage Insurance Premiums.  Any new FHA loan after the date is subject to higher rates on Mortgage Insurance Premiums and the duration of the MIP.

The FHA Mortgage Insurance Premium(MIP) consists of 2 parts, upfront MIP and a monthly MIP.  The rates now are 1.75% of the loan amount upfront and 1.35% per month on a 30 yr fixed rate loan amount and the monthly payment.  For example, a 30 yr fixed rate FHA Mortgage with 3.5% down payment, the numbers would look as follow:

Purchase price: $175,000-This is the average price in my market, Boise, Idaho.

3.5% down $6125,

Loan: $ 168,875

Upfront MIP, 1.75% $2955.31

Monthly MIP: 1.35%  $2279.81 per year or $189.968 per month.

As you can see, the FHA Mortgage Insurance can add a considerable amount to your monthly payment.

As if that wasn’t enough, the Mortgage Insurance is part of the loan for as loan as you have a FHA loan.  It used to drop off once you had paid your balance down to 78%.  Now the only way to drop MIP from your loan is to refinance out of the FHA loan or sell the property.

This will make conventional loans, with their 3% down payment much more attractive than a FHA Loan.

Any good loan officer will run the comparisons for a home buyer considering a FHA loan to make sure the client is getting the best possible loan at the lowest possible payment.

If you’re in the Boise, Idaho area and need a quote, give me a call.

 

 

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