HUD recently announced in Mortgagee Letter 2013-04 that any FHA case number issued on or after April 1, 2013 will be subject to an increased annual mortgage insurance premium (MIP) along with a new cancellation policy. Streamlined refinances where the case number was endorsed on or before May 31, 2009 would be an exception to this rule. What this basically means is that now would be the time to act if you are considering an FHA purchase or refinance!
What you need to know…Currently an FHA borrower that puts down the minimum 3.5% down payment will receive a MIP factor of 125 bps. Now under the new guidelines that same borrower would have an MIP factor of 135 bps. If an FHA borrower puts down 5% the current 120 bps is going up to 130 bps. Does this change effect the FHA 203k rehab loan? And the answer is yes, because that loan product follows the same guidelines.
The biggest change is the revision in the term of how long the annual MIP is charged. Currently with a 3.5% down payment it is being charged for 5 yrs and with 78% equity in the property the MIP would be cancelled. Based on the new guidelines the Annual MIP will be charged for the life of the loan. So the only way to get out of the monthly mortgage insurance will be to refinance out of it to a Conventional loan or to sell and move.
There are some advantages if the borrower does choose to use a larger down payment. For instance, putting down 10% on a 30 yr term would allow the buyer to have the MIP cancel at 11 yrs into the loan.
Calling all shoppers and potential borrowers – if you are under contract or have a property address we can pull a case number before March 31st to secure the lower MIP.
Realtors – Anyone you have shopping now let’s get them under contract so we can get the case numbers pulled before these changes take place! We have to get case numbers pulled before March 31st but the loan does not have to close that quick.
FHA loans still have several great factors that will help potential homeowners get into homes and stay in those homes: Credit scores as low as 640, Debt to Income up to 54% and a low down payment of 3.5%…just to name a few.
With all of the changes the questions now become…What will happen to FHA loans? Will they still be as popular? Will this change to the term and the premium really deter potential home buyers from using the FHA loan? Only time will tell and regardless of the outcome please know I’m here to help with all of your lending needs…
Call me today and let’s talk about the best program for you…FHA, VA, Conventional loan and Renovation Loans…I have everything to meet your needs. Don’t let the clock run out on the changes to the FHA mortgage insurance.