FHA Payments Increasing

(Last Updated On: February 24, 2016)

FHA Mortgage Payments Going up

Two Items in this Post:

  • The Up Front Mortgage Insurance Premium ( UFMIP ) for Federal Housing Administration (FHA) Mortgage Loans  by 28% (from 1.75% to 2.25%) of the loan Effective 4/5/2010.
  • Seller Concessions on FHA to drop from 6% to 3%

First lets cover the increase in the UFMIP

  • Realtors if your buyers don’t have the disclosures dated by 4/5/10 there may be a nasty surprise during the closing process
  • Borrowers if your lender has not disclosed to you by this date you will have to pay the higher premium.

Since 01/01/10 the definition of what an application is has changed as follows:

  1. Borrower’s Name
  2. Borrower’s Monthly Income
  3. Borrower’s Social Security number in order to obtain Credit Report
  4. Property Address
  5. Estimated Property Value
  6. Loan Amount

How many lenders Translate this:money and change

  1. Borrower’s Name
  2. Borrower’s last 30-days of pay stubs to prove income
  3. Copy of Borrower’s Social Security Card for credit report & Payment for credit report
  4. Executed Contract with Property Address
  5. Estimated Property Value
  6. Loan Amount

Note there are subtle differences and many complain the new RESPA rules that mandated this change actually hurt the consumer.  While I’m not debating this in this blog it should be noted that when you are trying to get the lower FHA mortgage insurance premium it is better to be more safe than sorry.  With the number of loan originators declining and lenders attempting to keep service levels high there is an intent to discourage tire kickers and this is their way of doing it.

Second, FHA has announced the reduction of seller contributions from 6% to 3%.

Currently, the maximum seller contribution on a FHA loan is 6%. It has been proposed that it will be reduced to 3% by this summer,this brings FHA in line with conventional loans which have allowed 3% for years unless the borrower put 10% down and then it rises to 6% and with 25% down it rises to 9%

Here’s a the info from from HUD:

HUD_logo2“The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.”

The change would go into effect in early summer and will be posted in the Federal Register. It is noteworthy that USDA is still at 6% and VA guidelines allow for a 4% seller contribution.   So while it has not changed yet is it something you should keep in mind when writing your contracts and you may want to call our office before sending that contract out.

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