Jeff's Post correct some miss information that is circulating about the proposed change in FHA's MIP Premiums. Besides individualsconsidering a home purchase, current Ohio home owners considering refinancing using a FHA Loan or a FHA Streamline, the dates and the higher Monthly MIP should be considered. Interest rates are great right now and It is my opinion that if it makes financial sense to refinance your mortgage now is a great time to do it. FHA has a Streamline Refinance that can allow even homeowners that purchased their home during the housing peak to refinance to a super low rate even if their equity position is negative. What the future holds with interest rates is anyone guess, but if interest rates rise the option of allowing someone to assume a low rate of 4.00% - 4.25% could make your home attractive to potential buyers. In Ohio, give me a call otherwise give a call to one of the other mortgage professionals on ActiveRain.
The President officially signed Bill H.R. 5981 on August 11th, 2010 which became public law. I wrote about the actual changes to FHA loans and how it will affect borrowers as of October 4th, 2010. Please read : Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium
There has been a main problem in regards to the information being supplied since this bill was passed by the Senate, which was on August 4th, 2010. I have read several blogs out on the internet both by AR members and the news media stating that the monthly mortgage increase has been raised to 1.55 basis points. This is correct and incorrect. Read below...
The following summary below was written by the Congressional Research Service.
Yes, congress passed the monthly mortgage insurance to 1.55 basis points. But this is a cap and not the actual amount that FHA is prepared to use on all FHA loans for now. The new monthly mortgage insurance rates will be either .85 or .90 basis points, all depending on the amount of your down payment., which I explained in this post. FHA Mortgages monthly mortgage insurance changes - effective October 4th, 2010 -
But if you read some of these other posts, they don't explain it this way. Some give examples of the mortgage payments of like $167 more a month on a $200,000 mortgage, which is based on 1.55 basis points. If you actually use .90 basis points, that mortgage payment now increases only to $59 more a month. Sorry folks, but that is a huge and misleading difference of $108 a month and could scare possible buyers away if not properly educated about this new change for FHA loans.
Keep in mind though, FHA will not need the approval from Congress to ever change these rates as long as they don't exceed 1.55%.
Another thing, HUD has not released a FHA mortgagee letter as of yet. But FHA did announce this as a press release with a FHA letter. FHA Mortgages - change in mortgage insurance Any and all FHA case numbers assigned on and or after October 4th, 2010 will be subject to these new changes.
3 quick examples :(both examples are putting the minimum down payment of 3.5%)
- On a $275,000 mortgage - the change in payment would be about $70 higher a month
- On a $200,000 mortgage - the change in payment would be about $45 higher a month
- On a $125,000 mortgage - the change in payment would be about $27 higher a month
These FHA Loan changes are the same, no matter what state you reside in.
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