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FHA MIP ALERT: Mortgage Insurance Premiums Increase April 2012

FHA Mortgage Insurance Increase April 2012FHA 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

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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.

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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?

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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.

 

 

 

 

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About Scott Schang

As a 18 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

5 Comments

  1. Christine on March 1, 2012 at 4:06 pm

    As someone looking to buy a home this year this news is unsettling because the bottom line is that it increases our costs. I hope home prices continue to drop so that in the end it balances out.

    • Scott Schang on March 2, 2012 at 9:56 am

      I couldn’t agree more Christine. Interest rates should remain low and in some areas we may continue to see home prices drop. Home prices are unique to area, community, even neighborhood. The reality is while this is an increase in cost, it will not impact your ability to purchase very much unless you are pushing the limits of what you can afford. It’s probably not a great idea to purchase at the absolute extreme maximum that you qualify for if you can help it 🙂

  2. Deborah M on February 28, 2012 at 12:53 pm

    I have a conventional loan. Does this exclude me from the increase to my MIP?

  3. Charlotte on February 28, 2012 at 8:51 am

    I don’t understand if the increases affect new buyers only or if current mortagages are included as well.

    • Scott Schang on February 28, 2012 at 9:02 am

      Charlotte, this only applies to new FHA loans after April 1st.

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