2013 FHA Mortgage Insurance Changes

FHA Mortgage Insurance Changes 2013

2013 FHA Mortgage Insurance Changes

Arizona FHA buyer‘s buckle up, FHA is at it again.  As of January 31, 2013 FHA has officially made the mortgage insurance related changes we announced just a few months back.  If you are into reading legal jargon, here is a copy of the official notice/ML 2013-047: FHA CHANGES – MI.  For the rest, here is a brief overview:

The 2 Changes:

  1. INCREASE TO AN FHA BUYER’S MONTHLY MORTGAGE INSURANCE COSTS (known as “annual MIP”) – specific change depends on loan scenario
  2. ELIMINATION OF AN FHA BUYER’S ABILITY TO HAVE MONTHLY MORTGAGE INSURANCE FALL OFF OF THEIR MONTHLY PAYMENT- specific change depends on loan scenario

There are 2 different effective dates for each of these changes for Phoenix area FHA buyers  – April 1, 2013 and June 3, 2013.   April 1, 2013 changes are GREEN.   June 3,2013 changes are BLUE.  Please note that FHA’s effective dates are based on FHA case # assignment not closing date.  A buyer can close on an FHA loan after the deadlines below and still take advantage of today’s more favorable MI guidelines as long as their lender assigned their FHA case number prior to the appropriate/relative deadline.  Effective dates in the land of FHA are also “on or after” dates.  Case numbers assigned on or after these dates are subject to the change.

CHANGE 1:

Increase to an FHA buyer’s monthly mortgage insurance costs (2 of the most common scenarios changes outlined below – see “MI Increase Chart.png file attached to email for more scenarios):
1. 30 Year FHA Loan with less than 5% down (Most Common Scenario):
Current annual rate for FHA Monthly Mortgage Insurance: 1.25%    New annual rate for FHA Monthly Mortgage Insurance: 1.35%*
This change increases the monthly mortgage insurance payment on a 30 year FHA loan equal to  $250,000 by $20.83 per month (old mo mi pmt: $260.42/new mo mi pmt: $281.25)

2.  15 Year FHA Loan with less than 10% down:
Current annual rate for FHA Monthly Mortgage Insurance: .6%    New annual rate for FHA Monthly Mortgage Insurance: .7%*
This change increases the monthly mortgage insurance payment on a 15 year FHA loan equal to  $250,000 by $20.83 per month (old mo mi pmt: $125/new mo mi pmt: $145.83)

3. 15 Year FHA Loan with less than 22% down:
Current annual rate for FHA Monthly Mortgage Insurance: .0%    New annual rate for FHA Monthly Mortgage Insurance: .45%
This change increases the monthly mortgage insurance payment on a 15 year FHA loan equal to $250,000 by $93.75 per month (old mo mi pmt: $0/new mo mi pmt: $93.75)

See Mortgagee Letter link above for details on additional loan scenario guidelines.  

*Loan amounts less than or equal $625,000

CHANGE 2:

Elimination / Revision of the ability of an FHA buyer to naturally eliminate monthly mortgage insurance payments:

1. 30 Year FHA Loan with less than 10% down (Most Common Scenario):
Current mortgage insurance elimination period: 5 years & 78% loan to value    New mortgage insurance elimination period: Loan Term (which means it never goes away naturally/buyer must refi to Conventional)

2. 15 Year FHA Loan with less than 10% down:
Current mortgage insurance elimination period: 78% loan to value    New mortgage insurance elimination period: Loan Term (which means it never goes away naturally/buyer must refi to Conventional)

On various other scenarios mortgage insurance will be eliminated after 11 years.  See Mortgagee Letter link above for more.   

For current FHA homeowners looking to still take advantage of an FHA streamline and the “grandfathered” MI rates based on a case assignment date of May 31, 2009 they are still in luck!  These changes do not impact them.  These changes also do not impact:

Title I loans
Home Equity Conversion Mortgages (HECM)

Please contact me if you have any question on this latest round of FHA mortgage insurance changes.

By Jeremy House
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