Time to Act Is Now to Avoid Higher FHA MIP
By: Rosemary Rugnetta | February 26th, 2013
In approximately one month from now, the costs for FHA mortgages will be changing as the latest guidelines have already been released. It is time to act now to avoid the higher FHA MIP (mortgage insurance premium) that is set to go into effect.
FHA will be increasing the annual mortgage insurance premium on many loans starting April 1st. This is in effect for case numbers that are issued on that date and later. For most FHA loans, the annual mortgage insurance premium will go up by .10%, or $100 per year for each $100,000 in loan amount.
In addition, new loans that have case numbers issued starting June 3rd will no longer be able to cancel the annual mortgage insurance premium when the loan to value has reached 78%. Mortgage insurance will need to paid for the entire life of the loan. Any FHA mortgage that starts with a loan to value that is above 90% will require mortgage insurance for the entire loan term. If the original loan to value is between 78% and 90%, the mortgage insurance premium will be canceled if the balance drops below 78% of the original loan amount any time after 11 years. Previously, FHA MIP could be canceled after 5 years.
These are significant changes to the FHA mortgage program that can have an impact on potential borrowers. FHA will also require that credit scores be a minimum of 620 and debt to income ratios must be no more than 43% for automated underwriting. Below 620 and more than 43% will require manual underwriting by an FHA underwriter, as well as, compensating factors.
The time to act is now to avoid the higher FHA MIP and other changes if borrowers are considering an FHA mortgage in the near future. Case numbers must be obtained prior to the change in order to fall under the old FHA rules. For more information from FHA approved lenders, the online form is available for submission and will return a response almost immediately.
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