A bit of good news the proposed changes below are going to go into effect on Oct 4, 2010.
please click here for HUD letter
Congress has passed H.R. 5981 which gives FHA the authority to increase monthly premiums. It appears to become effective for case numbers issued after September 7, 2010. At the same time UFMIP will be reduced to 1.00%. The changes will be as follows:
UFMIP: 1.00%
Monthly Mortgage Insurance for LTV’s < 95% = .85
Monthly Mortgage Insurance for LTV’s > 95% = .90
The current Monthly Mortgage insurance rate is at .55
Example:
| Sales Price | $150,000 | Today | 9/7/2010 | Difference |
| Base Loan | $144,750 | $144,750 | $144,750 | |
| Upfront Mip | 2.25% | 1% | 1.25% | |
| $3,256.87 | $1,447.50 | $1,809.37 | ||
| Total Loan | $148,007 | $146,198 | ||
| P&I @ 5% 30 Fixed | $794.53 | $784.82 | $9.71 | |
| MonthlyMI | 0.55% | 0.90% | 0.45% | |
| $67.83 | $115.74 | $47.91 | ||
| Total Payment | $862.36 | $900.56 | $38.20 |
Some people are advertising this as a benefit to the buyer with the lower upfront MIP. I am not seeing the overall benefit based on the economics. The benefit long term is that this will help FHA shore up its reserve account in the market we are in to ensure financial stability – I get that. At the end of the day - Yes it will cost the buyer more money – but this is not the worst thing and puts numbers more in line with conventional mortgage insurance. Roughly for every $100,000 financed the cost will be about $25 per.
Summary – If your working with a buyer now use this to create a sense of urgency and please remember it is only a 3.5% down payment.
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