HUD has announced their intention to change the factors for both Upfront Mortgage Insurance (the one time premium that is financed into an FHA loan) and Monthly Mortgage Insurance (the amount that is paid monthly by the homeowner).

GOOD NEWS!

Upfront Mortgage Insurance Premium (UMIP or MIP) Change
Current Up-Front Mortgage Insurance Premiums are calculated at 2.25% of a borrowers loan amount. The change will lower that to 1%. For example:

Currently UMIP on a $200,000 equals $4,500.
The new UMIP on a $200,000 will equal $2,000.

BAD NEWS!

Monthly MI Change
Current Monthly Mortgage Insurance is calculated at .50% - .55% per year depending on loan to value. The change will increase the Monthly MI factor to .85-.90% depending on loan to value. For example:

Currently an FHA Monthly Mortgage Insurance payment on a $200,000 loan equals $91.67 ($200,000 * .55%/12 months = $91.67).
The New FHA Monthly Mortgage Insurance payment on a $200,000 loan will equal $150.00 ($200,000 * .90%/12 months = $150).

Assuming a $200,000 loan at 4.5% (30 yr fixed) with 3.5% down the difference in payment is as follows:

Current payment: $1,167.70 PITI (assuming $150 for taxes and $50 for homeowners insurance)
New payment: $1,213.92 PITI (assuming $150 for taxes and $50 for homeowners insurance)

A borrower will need an additional $75-$80 (est) in monthly income to qualify for the same loan amount (per $100,000 in loan amount).

These changes are slated for case numbers assigned September 7th. Right now the change is awaiting the President’s approval. I will be sure to keep you posted.

Thank you for the update Jeremy House!

You contact Jeremy House at Prime Lending on his website by clicking the image below.