by Pat Zaby
August 24, 2010 7:36 AM
FHA Commissioner David Stevens has announced the changes in Mortgage Insurance Premiums will go into effect on September 7, 2010. However, FHA will make the premium fee changes on all new case numbers effective October 4, 2010. The reduction of the up-front premuim appears to lessen the effects from the increase in the annual premiums but it doesn't mean that they're offsetting.
While the up-front has been lowered to 1.00% from 2.25%, the annual premium was increased to 0.90% from 0.55%. Even though the up-front was decreased, the annual premium increase will result in higher monthly payments $38.98 on a $175,000 home with a 3/5% down payment.
The MIP must stay in effect for at least five years. In this example, the buyer would pay an additional $2,285.40 in that time frame which would be close to the lower annual MIP charge. However, for the MIP to be removed at the end of five years, the remaining balance must be 78% or less than the value of the property which would probably require a new appraisal.
The takeaway is that the Mortgage Insurance Premium has changed and there is a small window of opportunity before it takes effect. If FHA has issued a case number prior to the effective date of the change, the buyer can get in under the old rules.
The deadline may create a sense of urgency among buyers and you can help them save money while putting a transaction on the books prior to Labor Day. Call your FHA buyers TODAY!
