This Week FHA Announced changes to both the Monthly Mortgage Insurance Premium and the Up Front Mortgage Insurance Premium (UFMIP)
Currently UFMIP is 2.25% as of October 4,2010 (Previously it was September 7th) it will be 1.00%. At first glance this is great. Ahh but the Hook comes in next. The Current Monthly FHA Mortgage Premium is .55% will be going to .85% to .90%
What will this do to your payment? Although you will be financing less FHA UFMIP the monthly will actually make your payments higher. The Best way to illustrate this is to see what it will do to the payment on an average $200,000 home at a 5% rate. See the Chart Below:
|Rate Increase Equivalent||0.330%||1.125%|
As you can see while what you roll into the loan is less you will be paying the equivalent of 1/3% higher rate resulting in a payment that is $43 more per month. Also Congress has empowered FHA to raise this to 1.5% at anytime in the future that FHA deems it necessary to do so without approval from Congress. That scenario is illustrated in the last column which would result in a payment that is $152 per month larger or the equivalend of having an interest rates 1 1/8% higher!
As long as you get your FHA Case number assigned before October 4th you can avoid this increased mortgage insurance premiums. There are also alternatives such as VA and USDA Rural Development loans that carry no monthly Mortgage Insurance, For More information on these programs check out the special programs section of our web site located here.
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