FHA Announced that it plans to raise both Upfront and Annual Mortgage Insurance premiums starting April 1st, 2012 (sorry, this is not a joke)
FHA MIP Increases in April, 2012
The FHA Upfront Mortgage Insurance Premium will go up .75% from it’s current 1% of the loan amount to 1.75%. This increase applies regardless of term or loan to value, which includes 15 year fixed FHA home loans.
The FHA Annual Mortgage Insurance Premium will go up .10% from it’s current 1.15% of the loan amount to 1.25% on loan amounts up to $625,500 beginning April 1st, 2012
The FHA Annual Mortgage Insurance Premium will go up .35% from it’s current 1.15% of the loan amount to 1.50% on loan amounts up to $729,750 beginning June 1st, 2012
MIP Increase Hurts FHA Streamlines
This is bad news for homeowners that currently have FHA mortgages with higher than “market” interest rates and have not taken advantage of the FHA streamline refinance program.
If your interest rate is above 5% in today’s market, an FHA streamline refinance allows you to reduce your interest rate with relatively little paperwork or cost.
There is a minimum threshold of benefit to the home owner that requires at least a 5% improvement in mortgage payment through rate reduction or refinance into a more stable loan product like an Adjustable Rate Mortgage into a fixed rate mortgage. A reduction in loan term from a 30 year fixed to a 15 year fixed is not considered a benefit under FHA streamline refinance guidelines.
This increase was expected, it wasn’t a matter of “if”, only a matter of “when”. As the Government continues to try to come to the rescue of distressed homeowners with toxic mortgages, it does so at the expense of home buyers and current homeowners that are making their payments on time.
If you are a home owner looking into a FHA streamline refinance, you’ve got a little over a month to lock in your interest rate.
Home buyers will need to have their interest rate locked, which means you need a property address.
Although you don’t need to provide your lender with an actual accepted purchase contract, the FHA loan approval and interest rate is tied to the property address. If the property address changes after April 1st, 2012, your FHA mortgage cost will increase.
I’m curious to know, if you were thinking of buying a home using FHA financing, does this discourage you? Will this affect your decision to be a home buyer?
I’m sorry to be the bearer of bad news here, but you’ve still got time to make a move before FHA costs increase.