Earlier this year the U.S. Department of Housing and Development issued the following changes to the FHA Loan Program.
April 1, 2012 Changes
Monthly PMI on FHA loans will be increasing by 10 basis points or 0.10 percent. This increase will affect all mortgages that originate on or after April 1, 2012. That comes out to about $17 per month more on a $200,000 loan. FHA has determined that beginning June 1, 2012 in instances where the mortgage exceeds $625,000 the monthly PMI rate will increase by and additional 0.25 percent.
Also effective April 1, 2012 FHA has increased the UpFront PMI or UFPMI. This UFPMI is a one-time mortgage insurance premium collected at closing and is often financed through the loan, by being added to the base loan amount. The premium has increased from 1% to 1.75%. That comes out to about $7 per month more on a $200,000 loan.
Looking to Refinance Your FHA Loan
Effective June 11, 2012 some current FHA clients will be able to complete a streamline refinance loan without being subjected to the current increases in PMI and UFPMI. In these cases the PMI will be lowered from 1.25% to .55% of the loan amount per year. The UFMIP will be reduced from 1% to .01%.
You may qualify for the streamline refinance program if you meet the following criteria:
• The mortgage you wish to refinance originated prior to June 1, 2009.
• You currently have a mortgage insured by FHA.
• You are current on your mortgage payments.
• The refinance will result in lower monthly payments for both principal and interest. In some cases it may be possible to convert an ARM loan to a fixed rate mortgage.
• No cash may be taken out on mortgages refinanced in this manner.
These changes apply to all mortgages insured under FHA Single Family Insurance except:
• Home Equity Conversion Mortgages
• Section 247 Hawaiian Homelands
• Section 248 Indian Reservations
• Section 223(c) Declining Neighborhoods
Take Aways:
• Increases in FHA loans UFMIP and MIP may make a conventional mortgage palatable; research to find out which financing vehicle is best for you.
• Streamline refinancing: If you have an FHA mortgage that originated on or before June 1, 2009 you may want to wait and refinance your FHA mortgage after June 11, 2012 to take advantage of the lower PMI and UFMIP rates. Talk to a mortgage lender to determine if you qualify for this refinancing program.