NEW FHA Mortgage Insurance Increase

mortgage

There are some major changes that FHA has planned to go into effect on April 1, 2013.

FHA is increasing the monthly mortgage insurance amounts and also extending the period that the monthly mortgage insurance has to be paid. Below is an example of a FHA loan with the minimum 3.5% down, 30 year term, $100,000 purchase price.

Current MIP (Mortgage Insurance Premium) is 1.25% – $100.52

New MIP (Mortgage Insurance Premium) is 1.35% – $108.56

On a $100,000 purchase price the difference in payment is an increase of $8.04 monthly. This doesn’t seem like a lot, but FHA is also changing the rule about how long this has to be paid. Currently, after 5 years you can drop the monthly mortgage insurance once you reach 78% of the original purchase price. The new rule eliminates this and requires the borrower to pay this amount for the life of the loan. This rule will go into effect on June 3, 2013.

If you are looking to buy a home using FHA and are planning on a down payment less than 10%, now is the time to buy before these increases take effect.

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